Red Robin Gourmet Burgers, Inc.

Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers Incorporated First Quarter 2025 Earnings Call. This conference is being recorded. During management's presentation and in response to your questions, they will be making four statements about the company's business outlook and expectations. These four looking statements and all of the statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the company's SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its first quarter 2025 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, Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. Let me begin by sharing how energized I am to be here as the CEO of Red Robin. Although new to the executive team, I've served as chairman of the board since 2019 and and have been well-versed in our turnaround plan to make this beloved brand relevant again. Under GJ's leadership and its North Star plan, we made critical investments while also taking steps to reduce overall operating costs. The focus on elevating the guest experience while building a winning culture has been integral to establishing a foundation upon which we can grow. I intend to continue to build upon this progress and I'll walk through my initial priorities and area of focus later in the call. To that end, I want to personally thank G.J. for all that he's done for Red Robin during his tenure both as CEO and as a member of the board. He and I have built a trusted, longstanding relationship, and I appreciate his willingness to collaborate during this transitional period to best position the company for its next chapter. With that, G.J. will now provide a brief recap of our progress. Todd will then review our first quarter results before I dive into our initial go-forward thoughts and priorities for Red Robin.

Thank you, Dave, and good afternoon, everyone. I would also like to echo Dave's optimism for the future of Red Robin. I'm very proud of what our team has accomplished over the past two and a half years. Through their hard work and dedication, we successfully laid the foundation for our comeback journey. Let me quickly recap some of what we accomplished over the past two and a half years to put the company in a position to drive long-term shareholder value and enhance Red Robin's competitive positioning. First, We took steps to make Red Robin an operations focused company through our managing partner program, which incentivizes our restaurant leaders to deliver strong and balanced financial results. Second, we elevated the guest experience through investments and upgrades in both food and hospitality. From rolling out flat top grills to deliver a thicker, juicier, and more flavorful burger to upgrading our bar menu and bringing back industry best practice staffing models. we are seeing tangible proof that our guests have begun to recognize and appreciate our efforts. Third, we optimized guest engagement through our relaunched loyalty program in 2024, allowing our guests to earn a reward much faster and encouraging more frequent visitation to capitalize on their earned rewards. The revamped Red Robin Royalty Program has continued to spur membership growth with approximately 15.3 million members at the end of the first quarter. And lastly, we drove growth in comparable restaurant revenue and unit-level profitability in both the fourth quarter of 2024 and the first quarter of 2025. On our last call in February, I shared that in 2025, we expect to become meaningfully more efficient and productive with our labor costs. Todd will expand on this in a moment, but I'm proud of the work the team accomplished to deliver on this goal in the first quarter, and I'm confident it will continue from here. In closing, it has truly been a privilege to lead such an iconic brand over the past two and a half years. With key elements of our plan now in place, and we have delivered strong financial results in the first quarter, we have reached a natural transition point in Red Robin's transformation. And I am confident the company is in great hands with Dave to lead the next phase of this journey. And with that, I'll turn the call over to Todd to walk you through the financial performance. Thank you, GK, and good afternoon, everyone. In the first quarter, total revenues were $392.4 million versus $388.5 million in the first quarter of fiscal 2024. The increase is due primarily to a comparable restaurant revenue increase of 3.1%, led by a 6.8% increase in net menu price, outweighing a 3.5% decline in guest traffic. Restaurant-level operating profit as a percentage of restaurant revenue was 14.3%, an increase of 330 basis points compared to the first quarter of 2024. If you recall, one of our focus areas for 2025 is to become meaningfully more efficient with our labor costs. We're pleased with our results in the first quarter as our operators delivered traction faster than we expected. Congratulations to our operations team on this progress and thank you for all of the hard work that goes into delivering these gains. General administrative costs were $27 million as compared to $25.8 million in the first quarter of 2024. Selling expenses were $9.4 million, a decrease as compared to $13.5 million in the first quarter of 2024. The decrease results primarily from a reduction in media in the quarter overlapping a marketing test last year. Adjusted EBITDA was $27.9 million in the first quarter of 2025, an increase of $14.5 million versus the first quarter of 2024. Adjusted EBITDA increased due to cost efficiency gains throughout the P&L, and particularly in labor, and the benefit of menu price increases. We ended the first quarter with $24.2 million of cash and cash equivalents, $9.1 million of restricted cash, and $35 million available borrowing capacity under our revolving line of credit. As I shared on our last call, one of our financial priorities in 2025 is to position the company to refinance the term loan that matures in the first quarter of 2027. During the first quarter, we used free cash flow we generated, coupled with approximately $5.8 million of gross proceeds from monetizing three owned properties to repay approximately $17.8 million of debt. This resulted in an outstanding principal balance under the credit agreement at quarter ends of $171.7 million. Turning to our outlook, we will now provide the following guidance for 2025. First, total revenue of between $1.21 to $1.23 billion, as compared to our prior guidance of $1.225 to $1.25 billion. This incorporates expectations that annual comparable restaurant sales will be generally unchanged at approximately 0%, and we will end 2025 with 393 company-owned restaurants in operation. Second, restaurant-level operating profit of 12% to 13% in line with our prior guidance. Third, adjusted EBITDA of $60 million to $65 million. also in line with our prior guidance. And finally, capital expenditures of approximately $30 million as compared to $25 to $30 million previously. While our first quarter results exceeded our expectations, we have pared back our outlook for the remainder of the year due to the broader macro and consumer environment. Our guidance includes an expectation that guest traffic trends from the past few months continue for the remainder of the year. We've also included a cost headwind based on current tariff policies. I would note we are not planning any menu price increases in the remainder of 2025. We anticipate absorbing the current expected impact of tariffs as we prioritize maintaining value for our guests. The great work of our operators to capture cost savings greater than we initially planned supports this approach. For the second quarter, I'd like to remind everyone that with the launch of our new loyalty program last year, we received a 220 basis point benefit to our reported comparable restaurant sales in the second quarter of 2024 from changes in loyalty revenue. We expect this not to recur in 2025, representing an approximate 240 basis point headwind for our second quarter of 2025 comparable restaurant sales. For modeling purposes, we expect comparable restaurant sales in the second quarter, inclusive of this headwind, and with less benefit from menu price increase in the second quarter than the first, will decline approximately 3%. We do not expect loyalty revenue will have a meaningful impact on comparable restaurant sales in the third or fourth quarter. Before I turn the call back to Dave, on behalf of over 20,000 Red Robin team members across the country, I would like to extend a very heartfelt thank you to GJ. In senior leadership positions, we are stewards of the business for as long as we have the privilege to lead. I am certain the Red Robin business and our people are better for you having led this company. For me personally, it's been an honor to be your partner. Thank you. Dave, I'll turn the call back to you.