Q4 2024 Red Robin Gourmet Burgers Inc Earnings Call
Speaker Change: Good afternoon everyone and welcome to the Red Robin Gourmet Burgers Incorporated fourth quarter 2024 earnings call. This conference is being recorded.
Speaker Change: During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations.
Speaker Change: These forward-looking statements, and all other statements that are not historical facts, reflect management's beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the company's SEC filings.
Speaker Change: Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company's operating performance that may be useful.
Speaker Change: Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release.
Speaker Change: The company has posted its fourth quarter 2024 earnings release on its website at ir.redrobin.com. Now I would like to turn the call over to Red Robin's President and Chief Executive Officer, G.J. Hart.
G.J. Hart: Good afternoon everyone and thank you for your interest in Red Robin. As we enter 2024, we laid out our vision to improve traffic in our restaurants and allow our guests to experience the substantial enhancements we have made in our hospitality and food quality over the past 24 months.
G.J. Hart: I'm proud to say we began to see the benefits of our work as we progressed through the year culminating in a 600 basis point improvement in traffic trends from the first quarter of the year to the fourth.
G.J. Hart: Before we dig deeper into our plans for 2025, let's take a look back at the progress we have made last year.
G.J. Hart: Starting with the operations, we continued our progress to deliver an upgraded experience to our guests. Dine-in guest satisfaction scores in 2024 increased approximately 8 percentage points compared to 2023 and beat the casual dining average.
G.J. Hart: Satisfaction scores as measured by SMG posted their highest absolute levels since Red Robin launched with SMG in 2017.
Scores measured by Technomik are also
G.J. Hart: This guest feedback reflects gains across all aspects of the dining experience, from the taste of food, to the friendliness and attentiveness of our team, to the pace of the experience.
G.J. Hart: The benefit of these efforts shine through in many ways, including that our operators set approximately 1,400 sales records since the launch of the North Star Plan.
G.J. Hart: In May, we launched a revamped Red Robin Royalty Program and spurred membership growth of approximately 1.5 million members in 2024 to end the year with approximately 14.9 million members.
G.J. Hart: The new program allows guests to earn rewards much faster and encourages more frequent visitation to capitalize on their earned rewards, which expire after 90 days.
G.J. Hart: We continue to be pleased with the response from our guests.
G.J. Hart: and believe our revamped loyalty program was a key driver of our improved traffic throughout the year led by a record number of new members delivering 25 percent of all loyalty member visits from the relaunch of the program through the end of the year and the return of previous lapsed guests accounting for 20 percent of the visits.
G.J. Hart: Moving to value. During the second half of the year we rolled out our appointment dining promotions with three key objectives.
G.J. Hart: First, drive incremental traffic to days of the week that are less busy.
G.J. Hart: Second, provide the ability upsell additional items to drive average check while introducing new items. And finally, drive dine-in traffic allowing guests to fully experience our hospitality and food quality upgrades.
G.J. Hart: I'm proud to say that our efforts were successful as we were able to provide additional value to our guests and drive incremental visits without discounting the core equities of our brand.
G.J. Hart: Finally, in 2024, we successfully launched our Managing Partner Compensation Program, empowering our operators to function as a partner and owner of the restaurants that they oversee.
G.J. Hart: Now that every operator in our system is under this compensation program.
G.J. Hart: We have aligned the entire organization around a unified goal of driving growth in both traffic and profit dollars, and we're expecting to see continued benefits from the program as we move through 2025.
G.J. Hart: Looking to the fourth quarter, we delivered a 3.4% increase in comparable restaurant revenue, excluding the impact of a change in deferred loyalty revenue.
G.J. Hart: as the momentum that we saw to start the fourth quarter accelerated through the end of the year.
G.J. Hart: Importantly, we also gained traction in our management of the middle of the P&L to translate the top-line growth into a 19% increase in adjusted EBITDA to $12.7 million during the quarter.
G.J. Hart: Overall, we're proud of the progress we've made in our comeback plan, and I'd like to extend my heartfelt thank you to all of the more than 20,000 team members across the country.
G.J. Hart: Your dedication to improving every day and every shift is what drives our success and is the key to the revitalization of our beloved brand.
G.J. Hart: While we're pleased with the progress we've made under the North Star plan, we have two key priorities in 2025 to continue our comeback. First,
G.J. Hart: Starting with our top line drivers, 2025 is off to a good start with comparable restaurant revenue momentum we had exiting the fourth quarter continuing through the first eight weeks of the first quarter, partially due to lapping the comp weakness we saw last year.
G.J. Hart: Looking ahead at the remainder of 2025, we will lean into several drivers to improve our traffic trends and dive deeper into our new capabilities to keep Red Robin top of mind with our guests.
G.J. Hart: Let's start with loyalty. In addition to the guest-facing portions of the new program I spoke to earlier, we've also integrated new guest data capabilities to not only facilitate more personalized communication and promotions to members, but also allow us to reward our best guests.
G.J. Hart: While our marketing team has made use of our new capabilities from day one, we believe we're only scratching the surface.
G.J. Hart: Our new program facilitates deeper guest segmentation and personalization, and we're leveraging member exclusives, gamification, and compelling content campaigns to reap the full rewards of our program, driving new member growth and continuing our momentum, increasing guest frequency.
G.J. Hart: Since the launch of Loyalty 2.0 last year, loyalty transactions, which are more profitable on average, have increased 13%, representing both an increase in guest frequency and the addition of new loyalty members.
G.J. Hart: We continue to be excited by the potential of Loyalty 2.0 as a key driver for traffic growth.
G.J. Hart: Turning to the menu, we expect ongoing new menu items and innovation throughout the year, starting with the launch of our Hot Honey platform in March.
G.J. Hart: The platform will include a hot honey crispy chicken sandwich, wings, and pizza offering.
G.J. Hart: We are excited to launch these great menu items, and I would note, the Hot Honey Pizza is the most successful LTO our partners at Donato's have ever launched.
G.J. Hart: We'll share more as the year progresses, but we expect to introduce additional items over the course of the year, including great salad options.
G.J. Hart: and LTOs for the summer. Classic Red Robin Burgers our guests have loved over the years and we may introduce a new flavor profile or two from around the globe to deliver our guests the amazing flavors that they can only get at Red Robin.
G.J. Hart: We expect to continue to prioritize everyday value as a means to grow visits with our current guests and drive new guest trial of our quality and experience upgrades.
G.J. Hart: This includes maintaining our successful Monster Mondays, $10 cheeseburger Tuesdays, and Kids Night Wednesday promotions.
G.J. Hart: $10 cheeseburger Tuesday, as an example, has continued to prove successful in driving double-digit traffic growth and incremental visitation on a typically quieter day of the week.
G.J. Hart: I'd like to touch on our marketing team leadership and a change that we announced a few weeks ago.
G.J. Hart: We believe we have a great opportunity to further accelerate our guest traffic improvements with compelling marketing programs that message to consumers the fantastic food and experience they now receive at Red Robin and fully capitalize on the power of digital, social and owned channels.
G.J. Hart: The search for a leader best suited to help us achieve these goals is currently underway.
G.J. Hart: We are very fortunate to have two great leaders already in place to drive our marketing efforts during this interim period. Kathleen Bush, our Vice President of Marketing and Brand Development, and Dave Dodson, Vice President of Marketing and Internal Communications.
G.J. Hart: Both have worked with me in the past and along with our talented marketing team, I have great confidence we will make quick progress and are in a position to deliver on our 2025 sales plan.
Turning to Profitability
G.J. Hart: Over the past two years, we've invested to improve the quality of our food and our hospitality, from introducing flat-top grills and upgrading over 85% of our menu to deliver a true gourmet burger experience, to adding team members to deliver great hospitality.
G.J. Hart: We're proud to see these investments reflected in sustained improvement in overall satisfaction scores, showcasing that our guests are recognizing and enjoying the upgraded overall experience.
G.J. Hart: Throughout 2024, we put our resources behind arming our restaurant teams with information and the tools needed to drive everyday efficiency.
G.J. Hart: We launched new dashboards and scorecards to inform our teams. We reconstructed and relaunched actual versus theoretical food cost measurement.
G.J. Hart: While these tools now are in the hands of operators, the data used to drive these programs, along with our team's efficiency in using them, improves by the day, and we expect we will continue to benefit.
G.J. Hart: in 2025. As we go forward, our focus will be to maintain our improved hospitality and guest experience while creating efficiencies throughout our P&L to drive growth in restaurant level and corporate profitability.
G.J. Hart: This is showcased in our margin guidance with gains of at least 120 basis points in 2025.
G.J. Hart: In 2025, we expect to become much more efficient with our labor costs, and this is the primary driver of our expected increase in restaurant-level operating profit.
G.J. Hart: We were pleased to recapture our base level of expected labor efficiency in the fourth quarter on the back of the hot schedules implementation
G.J. Hart: Maintaining this fourth quarter level of efficiency would result in approximately six million dollars or approximately 50 basis points of savings through the first three quarters of 2025.
G.J. Hart: As we have other efficiency measures and tests that we are very optimistic will deliver additional benefits.
G.J. Hart: Beyond labor, our supply chain team has done a great job over the past two years identifying and capturing savings that achieve our hurdle of parity or better for the guest experience.
G.J. Hart: Past examples of this included switching from a 10-pound case of hamburgers to a 20-pound cases to deliver the exact same hamburger patty to our guests while saving on our per case distribution fees.
G.J. Hart: We expect to continue to harvest opportunities to consolidate suppliers and streamline distribution to continue to generate savings in 2025.
G.J. Hart: Increasing the profitability of our restaurants requires dedication to both delivering a great guest experience, to grow guest traffic, and the diligence to manage the cost side of the business.
G.J. Hart: We are committed to both, and I am confident we are on the right track to deliver our targets in 2025.
G.J. Hart: Finally, I'd like to provide an update on our restaurant portfolio.
G.J. Hart: As we shared last quarter, while more than 300 of our company-owned restaurants continue to perform very well, we have approximately 70 restaurants that generate a restaurant-level operating loss of approximately $6 million in 2024.
G.J. Hart: a drag of approximately 210 basis points on total company restaurant level operating profit.
G.J. Hart: Inclusive of capital expenditures and G&A burden, we estimate the total cash burn associated with these restaurants at approximately $9.5 million in 2024.
G.J. Hart: In the fourth quarter, we impaired the majority of these assets.
G.J. Hart: and it is currently our base case expectation that we will close the majority of these restaurants over the next five years at their lease expiration.
G.J. Hart: As such, we expect to close 10 to 15 restaurants in total in 2025.
G.J. Hart: We believe the expected closure of a majority of these restaurants will allow the strength of our remaining portfolio to become clear over time and free cash that we expect to reinvest in the business and use to repay debt.
G.J. Hart: We are also exploring other avenues to accelerate this process as we expect further updates on our progress in future quarters.
G.J. Hart: And with that, I'll turn the call over to Todd to walk you through the financial performance before I provide my closing thoughts.
Todd: Thank you, GJ, and good afternoon, everyone. In the fourth quarter, total revenues were $285.2 million versus $309 million in the fourth quarter of 2023.
G.J. Hart: The decline is due primarily to the fourth quarter of fiscal 2024, including 12 operating weeks, compared to 13 operating weeks in the same period last year.
G.J. Hart: This was partially offset by a comparable restaurant revenue increase of 3.4%, excluding the impact of a change in deferred loyalty revenue, led by an increase in guest check average, outlaying a decline in guest traffic.
G.J. Hart: As G.J. noted, I would also highlight that our guest traffic trends sequentially improved in each quarter of 2024, which we believe is a testament to the successful implementation of the North Star Plan, the traction of Loyalty 2.0, and the traffic-driving success of the appointment dining promotions.
G.J. Hart: Restaurant-level operating profit as a percentage of restaurant revenue was 11.5%, a decrease of 70 basis points compared to the fourth quarter of 2023.
G.J. Hart: The decline was primarily due to lower guest counts and discount levels that increased approximately 120 basis points as compared to last year
G.J. Hart: General and administrative costs were $18.4 million, as compared to $22.7 million in the fourth quarter of 2023.
G.J. Hart: Adjusted EBITDA was $12.7 million in the fourth quarter of 2024, an increase of $2 million versus the fourth quarter of 2023.
G.J. Hart: Adjusted EBITDA increased due to the reduced selling and G&A expenses and overcame the headwind of our fiscal calendar reverting to 12 weeks this year as compared to 13 weeks last year.
G.J. Hart: We ended the fourth quarter with 30.7 million dollars of cash and cash equivalents, 8.8 million dollars of restricted cash, and 20 million dollars available borrowing capacity under our revolving line of credit.
G.J. Hart: At quarter end, the outstanding principal balance under the credit agreement was $189.5 million.
G.J. Hart: As we mentioned on our last call, we executed a third amendment to the credit agreement during the fourth quarter, which increases our compliance leverage ratios in the fourth quarter of 2025 and first quarter of 2026.
G.J. Hart: and continues the revolver expansion from $25 million to $40 million through the first quarter of 2026 that was previously scheduled to expire in the third quarter of fiscal 2025.
G.J. Hart: Turning to 2025, our three financial priorities for the year are, first, deliver our 2025 financial guidance commitments.
G.J. Hart: Second, drive continued gains in traffic and aggressively capture operating cost efficiency, particularly in labor.
G.J. Hart: Third, position ourselves to be able to refinance our debt. As a reminder, our term loan matures in March of 2027.
G.J. Hart: We expect to use a portion of our free cash flow in 2025 to repay debt, and we are pursuing other options like monetizing remains-owned real estate to further support debt reduction and facilitate a refinance of the debt that remains.
G.J. Hart: This is a key focus for us in 2025, and I expect to provide periodic updates.
Turning to our Outlook
We will now provide the following guidance for 2025.
G.J. Hart: First, total revenue of between $1.225 billion and $1.25 billion. This incorporates our expectations for modestly positive same-store sales.
G.J. Hart: outweighed by an approximately 2% revenue headwind from the restaurant closures G.J. mentioned earlier.
G.J. Hart: Second, restaurant level operating profit of 12% to 13%, which represents an increase of 120 to 220 basis points as compared to 2024.
G.J. Hart: Third, adjusted EBITDA excluding non-cash stock-based compensation of $60 million to $65 million.
G.J. Hart: Please note that starting in 2025, our reported adjusted EBITDA and our adjusted EBITDA guidance will add back non-cash stock-based compensation expenses as we believe this change will provide investors with a better understanding of our financial performance from period to period.
G.J. Hart: The ad back of non-cash stock-based compensation is the only change between the old and new definition of adjusted EBITDA.
G.J. Hart: For transparency and the ability to compare old versus new, we estimate non-cash stock-based compensation expense will total between $9 and $10 million in 2025.
G.J. Hart: We have also included a reconciliation of quarterly 2024 results to this new definition in the earnings release issued earlier today.
Finally...
Capital expenditures of $25 million to $30 million.
G.J. Hart: In closing, I share GJ's optimism for what 2025 has in store for us. The heavy lifting of transforming Red Robin into an operations-focused company is largely behind us, giving us a solid footing to build upon as we continue our comeback journey.
G.J. Hart: We are now working hard to optimize guest engagement and combined with effective operating expense management We are well positioned to capture the long-term growth opportunity for this iconic brand
G.J. Hart: With that, I will turn the call back over to G.J.
Thank you, Todd.
Speaker Change: Our commitment has always been to provide our guests with great hospitality, serving delicious food at a great price, and creating a fun, friendly atmosphere with every visit.
G.J. Hart: We believe the North Star Plan is helping us fulfill that promise.
G.J. Hart: The last two years have been transformational at Red Robin and I believe our team has done a tremendous job in executing our strategic plan and successfully transformed this brand into an operations focused company.
G.J. Hart: As we look ahead to 2025 and beyond, the focus of our team will be on bringing back guests into our restaurants for moments of connection over craveable food that only Red Robin can provide.
G.J. Hart: With the strategy we have in place, we believe we are well positioned to deliver significant value to our guests and shareholders alike.
G.J. Hart: With that, we are happy to turn the call for questions.
Operator, please open the lines.
G.J. Hart: Thank you. We will now be conducting a question and answer session.
G.J. Hart: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
G.J. Hart: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please, while we pull for questions.
Speaker Change: The first question is from Alex Slagle from Jeffries. Please go ahead.
Speaker Change: and how to improve margins, which clearly you're doing. There is a good bit of pricing behind that in this quarter. And I guess, as you said, sort of like threading a needle and just sort of making sure you're not taking too much pricing.
Speaker Change: I guess, just wanted to get thoughts on that. I mean, maybe you don't need as much, maybe that'll come down, you know, as the year goes on and you have these incremental labor and supply chain efforts yielding some benefits, but maybe you can kind of talk about that balance.
Speaker Change: Yeah, hey Alex, relative to the pricing, you know, much of the pricing that we took in the fourth quarter was
really on the West Coast.
Speaker Change: where we've done a lot of benchmarking and had some opportunity, which carries over into 2025. And on our pricing thoughts through 2025,
Speaker Change: 1% area. And so, you know, definitely we're taking all that into consideration.
Speaker Change: In terms of threading the needle, you know, one of the things, you know, as we continue down the path to get ourselves real traction around traffic growth, which we believe we are getting.
Speaker Change: and starting to get, that to balance the cost side, there's just a lot of work. You have to remember that during this whole comeback process and journey.
Speaker Change: on not only what we're doing and the expectations from a hospitality perspective but how do we cook product and all of that. And so it carries, so all that work's been done over the last couple of years and so we believe we can get a ton of efficiency, particularly in the labor line.
Speaker Change: as we go through 2025, and we saw some of that in the fourth quarter of 2024.
Speaker Change: but we believe that there's a lot more to get and we're working hard to get it, none of which will...
Speaker Change: affect a guest experience by any imagination. So there's so much opportunity here in a journey of comebacks or turnarounds we're at the point now where we can definitely start to ramp up the pressure that we've put in terms of the expectations on financial performance.
Hopefully that gets to what you were looking for. Yeah.
Speaker Change: No, that's certainly encouraging and I guess as we look at like the sequential improvements you've seen in the menu mix and the discounts recently, you know, the components of the comp.
Speaker Change: Do you think this will continue to improve into 1Q and beyond, and if so, I'm kind of curious where that would come from. It would just seem like that would be more of a challenge, just with the promotional efforts underway to drive traffic.
Speaker Change: Yeah, hey, Alex Todd here. I'll talk about the discounts in particular of, you know, if you go back, it was really the third quarter of 2024 that we really launched the appointment dining.
Speaker Change: So I do expect in that comp detail, you'll probably see discounts increase year-over-year in Q1 and Q2, but then become much more normalized in Q3 and Q4. So that's the way we're thinking about it right now at least.
Speaker Change: You know, on the mix side, I'd say, you know, we've been pretty encouraged.
with all of the different headlines out there.
Speaker Change: We've talked about this in prior quarters, that we tend to look at add-ons in terms of the health of the consumer. Are people still adding appetizers? Are they still buying desserts? Are they still buying beverages? And we see all of those measures at parity or better to what they were previously. So, you know, there's always a little bit of mix.
Speaker Change: impact as we make changes to the menu. You know, we've been promoting our tavern lineup, which is a more value lineup in recent quarters, but the add-on items in particular have held up quite well, which gives us a lot of confidence in the the state of the consumer that's walking into our doors.
Great, thanks guys.
Thank you.
Speaker Change: The next question is from Jeremy Hamblin from Craig Hallam. Please go ahead.
Jeremy Hamblin: Thanks and congrats on the improved results. I want to start by just getting a little more color on quarter to date.
Speaker Change: Trends you noted, you know, some momentum as you entered into the year and wanted to just get a sense of where things stand maybe on a quarter to date basis. I know this is a
Speaker Change: you know, effectively a four month quarter for you. And, you know, I think February across the industry has been a little bit later than what we maybe saw in January, but wanted to get a sense for what Red Robin is seeing.
Speaker Change: Yeah, hey Jeremy, Todd here again. I'll start and G.J. can certainly add on, but...
Speaker Change: You know, I think I would build on G.J.'s comments in the script, right, where he said, hey, it's been a good start to the year, and I would certainly reiterate that.
You know, for us...
Speaker Change: You know, we always expected the first part of the quarter to be the best. If you recall for us...
Speaker Change: You know, with our West Coast footprint, the West Coast had some really tough weather events in the first quarter of 2024 and really depressed our first quarter. So we always expected the start of this quarter to be frankly the best part of the quarter and potentially even the year just given the easier comparison.
Speaker Change: We expect it to be a good start and it has been, so that's been encouraging.
Speaker Change: I think the way I talk about the February, you know, there was weather across a lot of the country in February. We've seen it in the industry numbers. That's embedded in what G.J. said in terms of the first eight weeks. So you're always going to have some ups and downs. We try not to get caught up on the weeks.
Speaker Change: As we think about it, you know, I'll tell you, we're kind of at the mid-range of our thinking is call it a plus three same-store sales on the quarter. Obviously, the weather has to cooperate, and we still have, as you said, eight weeks to go, but that's the way we see the quarter coming together as we sit here today. And so, that's the top-line side.
Speaker Change: I'll try to be brief here, but on the profitability side, I'll give you a sense of how we're thinking about that as well. A simple way to think about it, if you look at Q4, we basically generated a little over a million dollars a week of adjusted EBITDA.
Speaker Change: in a 16-week Q1, that'll get you to about $16 million. And then obviously we did make the change with adding back stock-based compensation, and that's another $2 to $3 million on the quarter. So again, eight weeks to go in the quarter here, but that's kind of the simple way we're thinking about top and bottom line.
Thank you.
Speaker Change: Got it. Great. And then let's just come back to some of the initiatives here on driving restaurant level margins. So, you know, kind of roughly 100, maybe 200 basis points during the year. And it sounds like you have some great labor initiatives going on. I wanted to get a sense for
Speaker Change: you know, of that range of improvement from the 10.8% that you saw in 2024, what portion of that do you expect to come from labor versus...
you know, hogs or other line items.
G.J. Hart: Yeah, the vast majority, Jeremy, will come from labor. Our cogs generally are at a point, they're pretty low in the first place, so I don't expect a lot of it to come from there. The majority will come from labor.
G.J. Hart: Got it. And then coming back to, you know, kind of trends and what you've seen, you noted that you've seen a lot of strength in the dine-in portion of your business, which I think implies that, you know, kind of takeaway or takeout has been a weak spot.
Third-party is more like 15% of sales.
and we are very pleased.
G.J. Hart: with where we sit to date on what we're doing with third-party. It is things like digital initiatives. As you know, in third-party, it's where you sit and where you come up in the algorithms. And we, you know, some of that is how much you invest with these third-party folks.
G.J. Hart: and so we plan for that in 2025. And our results in terms of where we sat from a year ago are very good and I'm very hopeful in terms of where third party can, what it can do for us in 2025.
Thank you. Great.
Speaker Change: Last one for me, just in terms of other marketing changes, I think last year your budget was around 30 million or so. On marketing, you're making some changes kind of at the top of that.
Speaker Change: division of your business. In terms of thinking about that pivot, what should we expect? We know a year ago you had some fairly expensive marketing during March Madness. I don't think you're planning to repeat that, but wanted to see if there's any additional color you can share there.
Speaker Change: Sure. Yeah, so the numbers are about the same in terms of that. Jeremy, one of the things that we're doing is, you know, really having a comprehensive...
Speaker Change: comprehensive program around marketing. So everything from local store marketing to digital social to just more traditional media.
Speaker Change: too early to talk about results of those markets, but we are
optimistic around that.
Speaker Change: That if we find out that we're getting a great return on that investment, we'll invest more in marketing because it'll be pretty immediate in terms of the return. So that's something we're definitely looking at. I would say that last year, too, we did a similar thing last year where you have it up to your point there around March Madness.
Speaker Change: And we did not see all the success, but there were some mitigating circumstances around that in terms of where media was placed and just other things that
Speaker Change: We didn't see the kind of results that we would have expected so Again, I'll go back to what we're doing this this year more to come on that But I would tell you that we're cautiously optimistic of what that can do for us
Thanks so much for the color and good luck.
Speaker Change: Thank you for having me. The next question is from Andrew Wolfe from CL King. Please go ahead.
Thank you. Good afternoon.
Andrew Wolfe: I wanted to ask about the loyalty year 2.0. Good afternoon again. So I think you said you had a 13% increase in transactions with loyalty members. Could you just maybe parse it out a little on
Speaker Change: you know, how that varied between new users and, you know, increased utilization.
Speaker Change: from existing members and kind of what the growth outlooks are for the program and how you see it evolving over the, I guess, the coming year or two.
Speaker Change: Yeah, so I would say that we are seeing nice growth from lapsed users as well as new users.
Speaker Change: I will tell you that 25% of our visits are new users and 20% from lapsed users. So we're seeing really, really good improvement on all levels, which again, gives us
Speaker Change: you know, reason to believe in what we're doing here in the future. So, we feel great about that.
Speaker Change: And, you know, again, if you start to do some math around what the loyalty can do for us.
Speaker Change: It's pretty significant if you increase that average frequency on a fairly average guest that comes three times a year.
Speaker Change: you get some of those lapsed users and you can continue to get signups.
Speaker Change: We continue to be very robust in terms of our efforts around sign-up, and we have a big target for this year because we're having so much success. And so far we're on track with that and feel great about that.
Good, thanks.
and of a scribe.
Speaker Change: The guest traffic trends and the two-year stack is a little better as well.
Is that doable, or are you just saying...
Speaker Change: kind of the whole? It's really hard. I mean, I would tell you, my answer is going to be pretty vanilla. It's really a little bit of all. And clearly, you know, the experience is better. We talked about that. And clearly, loyalty is really helping us. So it's hard to say the percentages on that, but it's all the above.
Speaker Change: boosting traffic, you know, getting it moving in a better direction.
That's correct.
all right and just one more this
Speaker Change: Most likely just for Todd, you know, I know you don't have formal guidance on free cash flow, but I think you mentioned it as
Speaker Change: in your plan, and I think, you know, that would be a change from, you know, burning cash. So...
Speaker Change: Your capex if I were 25 to 30 million so is that imply you expect to have cash from operations?
Speaker Change: above that figure like a traditional free cash flow measure or are you thinking
Speaker Change: when free cash flow includes, you know, maybe selling some assets or something.
Speaker Change: No, Andy, your first interpretation was correct, meaning achieving our guidance means we will have some free cash flow in what I would consider the most traditional sense, meaning from operations.
Speaker Change: Funding, you know, our capex as you alluded to we do think that that will generate some free cash flow this year, you know a Number that we hope will build in time so you can do the math on call it, you know 60 to 65 million of EBITDA to your point 25 to 30 million of capex
Speaker Change: and you know cash interest for us this year we think will be around 24 million which is kind of our midpoint.
Speaker Change: So, you know, it's it's a number that will look to grow in time, but that's a metric that I expect you'll hear us talk more about going forward. It's been a bigger focus for us internally. And as I alluded to, you know, paying down the debt as a means to then refinance that that is certainly top of mind for me.
Okay.
Thank you, that's good to hear.
Thanks, Vinny.
Speaker Change: The next question is from Mark Smith from Lake Street Capital. Please go ahead.
Mark Smith: Hi guys. First off, just wanted to clarify and make sure I heard right. On closings, you guys are kind of building into the guidance and expecting 10 to 15 this year. Any insight into kind of the timing of that and does that include kind of these asset sales here in Q1?
Yeah, you're spot on on all of that, Mark.
Mark Smith: The three restaurants that were alluded to as asset sales are included in that 10 to 15. Those we expect, those are under full contract. We expect that'll be a Q1 event.
Mark Smith: But in terms of the 10 to 15, we frankly expect it to be pretty spread over the course of the year. It's not necessarily concentrated in one quarter, even with those three in Q1. So that is embedded in the guidance, as you noted.
Speaker Change: okay and that just any you know shifts in commodities that we
Speaker Change: should be thinking about, anything on contract that's rolling off, any just insights into Anacosta sales would be great.
Speaker Change: What I would consider to be standard inflation and we think the commodity basket is call it 3% in total You have ground beef for us is always a big part of that
Speaker Change: And we do see that's the one we see the most inflation in which means we have offsetting you know deflation in other areas
Speaker Change: But in total, you know, G.J. alluded to it, our cost of goods, we feel pretty comfortable with where that's at. We'll find opportunities where we can, but that's one that, you know, from a price value standpoint, we're conscious of not driving too low. But in terms of the commodities,
You know, we do expect kind of that 3% range.
Speaker Change: I'll maybe tag on to that and just build on a comment G.J. made earlier, you know, from a price standpoint, I believe he referenced 1%, which is
the incremental action we expect in 2025.
we will have, as he alluded to.
Speaker Change: The actions that we took in 2024 will carry over to 2025 as well.
Speaker Change: I would expect, we would expect, that you'll see that pricing roll off in terms of the headline number through the course of the year.
G.J. Hart: from, you know, we expect we'll probably carry a good 8% or so of price in Q1, ramping that down to about 2% by Q4, and that includes the, what the only additional increase this year of 1% that G.J. mentioned.
Thank you.
Excellent. Very helpful. Thank you, guys.
Thanks, Mark.
Speaker Change: The next question is from Todd Brooks from Benchmark Company. Please go ahead.
Todd Brooks: Hey, good evening, everybody. And that's a nice way to end a year full of progress for you. So congrats.
Thanks, Todd. Appreciate that.
A few tag-end questions, if I may.
Todd Brooks: You talked about some of the menu newness coming in 25 GJ and wanted to maybe drill down some more on the
Todd Brooks: Hot Honey platform, and also remind us what it's competing against year over year when it launches in March. And is this a LTO or is this something that you can foresee based on performance flowing directly into permanent menu items?
Speaker Change: You know, so far it's tested well, so, you know, we're excited about what that can do. I don't believe we're going up against anything from a year ago, Todd, so there's nothing really there. And yeah, it's basically our first menu roll of two menus that we'll do during the year with some LTOs.
Sprinkled in.
Is that helpful? Okay. Yeah, that is.
Speaker Change: Secondly, can you talk through, and you talked through seeing kind of attach rates hold, but if you look at the same store sales performance in the quarter which was very strong,
Speaker Change: Did you see a spread or any sort of changes when you look by income cohort? Just wondering if there's any variability maybe in that lower income cohort or if they've responded to the value and hung in from a transaction standpoint.
Todd Brooks: If I understand your question, I would tell you that, as Todd just talked about a minute ago,
Todd Brooks: as well as we're seeing that lift on the tavern and some of the value stuff.
Todd Brooks: I don't think we've seen any significant movement during the quarter. We did, you know, as we commented on from an overall comp perspective, it got better throughout the quarter.
Speaker Change: Yeah, I didn't know if you looked at the sub $50,000 household versus higher income tranches if the performance was more variable with the lower income customer, that's what I was asking.
Todd Brooks: I don't think there's anything to note there at all, yeah, agree.
Speaker Change: That's great to hear. And then a final one I know you shared.
Speaker Change: some of the meaningful progress you drove in satisfaction scores over the course of this year. Just wondering, as you're looking at the individual components,
Speaker Change: How are customers rating you as far as scores on value metrics? You've got the the three pillars now, Monday through Wednesday. How are customers responding and scoring you on value? And if you look at the overall competitive environment
Speaker Change: I imagine, but I won't put words in your mouth, you feel pretty good that the value offering is competitive and traffic driving at this point and maybe no need to add more as things stand now.
Speaker Change: Yeah, I would agree with your last statement that we are happy from the values and hopefully you know some of the stuff that the noise that's out there around value will start to dissipate through 2025.
And in terms of...
Speaker Change: The first part of your question around, you're trying to get at
Speaker Change: value in respect to what we are going to do in the future?
Speaker Change: It's more of a more of a more of a part of satisfaction.
Speaker Change: customers when they're scoring you on value with the appointment. Yeah, I'm sorry, I gotcha.
Speaker Change: So when you look at our satisfaction levers and value being one of them, every metric has gone up.
value included.
Speaker Change: I would tell you that that's good news from our perspective because
Speaker Change: a little over two years ago, that number was continuing to go down. So we've made progress there.
Perfect. Thank you both.
Thanks a lot.
Speaker Change: There are no further questions at this time. I would like to turn the floor back over to G.J. Hart for closing comments.
Speaker Change: All right. Well, thank you all for joining us tonight. We look forward to reporting on the next quarter. Thank you very much. Good evening.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.