Good Times Restaurants Inc.
Q2 2019 Earnings Call Transcript

Published: 11 May 2019

[Operator:]

Good afternoon ladies and gentlemen. Welcome to the Good Times Restaurants Inc. Fiscal 2019 Second Quarter Earnings Call. By now, everyone should have access to the company's second quarter earnings release. If not, it can be found at www.goodtimesburgers.com in the Investors section. As a reminder, a part of today's discussion will include forward-looking statements within the meaning of federal securities laws. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect and therefore, investors should not place undue reliance on them. And the company undertakes no obligation to update these statements to reflect the events or circumstances that might arise after this call. The company refers you to their recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions.

[Boyd Hoback:]

Thanks Brandon and thanks everybody, for joining us again today. I've got Ryan Zink, our Chief Financial Officer with me. And I'll again begin with a high level overview of our quarterly results and progress on various initiatives. For the second quarter, total revenue grew 15% and includes a 1.3% increase in comp restaurant sales at Bad Daddy', and that's inclusive of losing 12 operating days to the Balm cycling event, weather event in Colorado. And we also had a 7.1% decrease in comp restaurant sales at Good Times and that's 5.9% adjusted for 30 lost operating days due to that Balm cycle and weather event where we lost all of our stores for a day and some for a few days. Aside from that weather event, Good Times sales were again impacted by fairly dramatic year-over-year weather comparisons for the second quarter in a row, but the prior year having above-average temperatures and below-average precipitation and this year being exactly the opposite. We're also comparing to a 7.1% increase in comp sales last year. The good news is that subsequent to the end of the quarter, we've bounced back nicely with a slightly more seasonable weather and with positive comps of approximately 4% on Good Times so far this quarter. We anticipate that we'll be able to sustain positive comp sales at both brands for the balance of the year, but those comp declines at Good Times, obviously, have had a significant effect on our financial results for the first two quarters. At Bad Daddy's, we're continuing to refine our menu offerings and continue to elevate the use of local brand partners and local ingredients in each of our markets on a quarter-to-quarter basis. And in May, we're introducing Niman Ranch lamb burger for this quarter's chef special. We're also rolling out a new menu in mid-May with approximate 0.8% price increase with slightly higher prices than that in Colorado. That's our second price increase of the fiscal year. Off-premise sales continue to grow, and we're finalizing the rollout of DoorDash delivery in all of Bad Daddy's stores this month. And we have been testing six Good Times stores. And based on our initial results, we plan to roll it to the balance of the Good Times stores by June.

[Ryan Zink:]

Thanks Boyd. At Bad Daddy's, restaurant sales during the second quarter were $20.4 million, and the increase of 27.8% versus $16.0 million during last year's second quarter. We had approximately 105 more store weeks this quarter versus the same quarter last year due to an additional nine units opened since the end of last year's fiscal second quarter, partially offset by overall lower average unit volumes.

[Boyd Hoback:]

Thanks Ryan. While we've gone through what we believe a temporary blip in Good Times comp sales trend in our first and second quarters, we believe we're back on track with a little help from Mother Nature. We're also laying the foundation at Bad Daddy's to again accelerate our growth into fiscal 2020 and beyond and expect to provide broader guidance for our longer-term growth plans next quarter. We appreciate your time with us today. And with that, operator, we'll open the call for questions.

[Operator:]

Thank you. We will now begin the question-and-answer session. Our first question comes from Will Slabaugh from Stephens Inc. Please go ahead.

[Will Slabaugh:]

Thanks guys. I had a question on Bad Daddy's. I appreciate that the extra color you gave on Good Times. I was curious if you would follow that up with some color on the Bad Daddy's side. How sales may have trended throughout that quarter? And then if you would be willing to give quarter-to-date update in terms of how sales have been trending on April and early May?

[Boyd Hoback:]

Well, you're talking about how Bad Daddy's for this current quarter, is that what you're asking?

[Will Slabaugh:]

The current quarter, correct.

[Boyd Hoback:]

Yes. We're -- again, depending on weather. It's -- we're continuing our trend that we saw in our second quarter. We've flattened out a little bit depending on week to week. But we expect again to kind of maintain that same trend that we've been on.

[Will Slabaugh:]

Great. And on the development side and how it relates to CapEx and the balance sheet, Ryan, I know you mentioned you'd be able to sort of self-fund out after the end of this year, it sounds like. What might that development acceleration look like in broad strokes for 2020? I know you've said you're going to give us more color on the next call. But just trying to get some sort of idea of how to model 2020 and how that pipeline is shaping up in general.

[Boyd Hoback:]

We haven't given guidance on that one, yet, Will. I'm a little reluctant to lay too much out there. But we anticipate it will be more than what it was here in fiscal 2019 and probably somewhere between this year and what it was last year. We opened nine stores last year and five this year. So, my guess it will be -- probably be somewhere in the middle of that.

[Will Slabaugh:]

Fair enough. And then just a housekeeping question on pricing. Where was pricing at both brands in the second quarter? And where do you expect it for 3Q and 4Q with the additional pricing you mentioned that may role on?

[Ryan Zink:]

So, during the quarter, at Good Times, I used -- because I kind of laid out for Good Times, are you speaking to Bad Daddy's?

[Will Slabaugh:]

Yes. Bad Daddy's, please.

[Ryan Zink:]

So, for Bad Daddy's, we had approximately 1.7% of price during the quarter and that's kind of blended between our two geographies. As Boyd mentioned, we have kind of slightly higher price level at Colorado -- in Colorado than we do in the rest of the system. So, if you kind of want to break that out, our costs, 1.3%., we had 1.7% of price. We actually had positive track, 0.2%. And so mix shift of just -- that would be 0.6% of unfavorable mix shift. We are taking -- and we've been I think fairly moderate with our pricing. We haven't been very aggressive on the Bad Daddy's side with our pricing this year. And so we're taking another 0.8% in this coming quarter. And we think that's going to be sufficient for -- combined with some other things that we're doing around kind of alcohol cost as well as other kind of mix management that we're trying to do to keep cost of sales kind of at or slightly below where they are currently.

[Will Slabaugh:]

Great. Thank you.

[Operator:]

At this time, I'm showing no further questions. I would like to turn the conference back over to Boyd Hoback for any closing remarks.

[Boyd Hoback:]

I just want to thank everybody again for joining us today and certainly look forward to our call next quarter where we anticipate continuing to have some better news based on our trends as well as a much further color on our development plans as we move into fiscal 2020. Thanks very much.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.