Red Robin Gourmet Burgers, Inc.

Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers Incorporated fourth quarter 2025 earnings call. This conference is being recorded. During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and therefore are subject to 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. Reconciliations 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 fourth 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. Thank you for your interest in Red Robin. As we close out 2025, our fourth quarter results reflect the steady momentum we're building as we execute against our first choice plan. We introduced this plan in the second quarter of 2025 to focus our priorities and outline how we intend to strengthen our competitive position and improve our overall performance. Today, I'll provide an update on our progress against its key pillars, and how we intend to build on that progress in 2026. Before I get into the details, let me begin with some context around our full year and fourth quarter sales performance. For the full year, comp sales were down 0.3%, excluding the impact of deferred loyalty revenue. This included a 3.5% increase in average check, offset by a 3.8% decrease in traffic. Our traffic improved in the back half of the year as we rolled off 2024 pricing actions and saw traction with our big young value offering. For the fourth quarter, comp sales were down 3.3%, excluding deferred loyalty revenue. This included a 0.3% increase in average check and a 3.6% decline in traffic. Now, like the broader industry, trends softened in October and November relative to where we exited the third quarter. In addition, we made the intentional decision to shift marketing spend into December to maximize reach during the holiday season. That strategy proved effective. Increased support behind our Big Yum value offering and our holiday promotions drove a notable inflection in December as we outpaced the Black Box Intelligence Casual Dining Index in traffic for the first time since the third quarter of 2024. Encouragingly, momentum continued into January where traffic was positive before weather events starting in late January with winter storm Fern have made results choppy in subsequent weeks. On profitability, we exceeded our expectations for both restaurant level margin and adjusted EBITDA in the fourth quarter. Full year adjusted EBITDA of 69.7 million represented 53% growth over 2024. and our lot margin grew by 190 basis points. Importantly, we achieved this result with only modest pricing in 2025. For perspective, in the fourth quarter, net pricing contributed just 1.6% to results, underscoring that our performance improvement is increasingly being driven by a stronger consumer proposition and improved operating efficiency. With that context, let me walk through our progress against each pillar of the first choice plan and our strategic priorities for 2026. First, let's start with hold serve. Our hold serve pillar requires that we sustain the progress that we make each quarter and then extend that improvement even further as we move forward. During the fourth quarter, our labor efficiency initiatives contributed approximately 180 basis points to restaurant level margins. These gains were consistent throughout the year and were a primary driver of a 250 basis point reduction in total labor costs for 2025. Importantly, we achieved these efficiencies while maintaining our guest satisfaction scores, demonstrating that productivity and hospitality can coexist. These improvements also reflect the increased accountability and ownership embedded in our managing partner model, which rewards our partners for improvements that they drive in restaurant-level profitability. This leads me to our next pillar, which is our drive traffic initiative. As noted earlier, we saw industry outperformance in December. We believe this improvement is driven by two primary factors. One, the power of our Big Yum Burger offer, and two, our improvements in how we market and message to our guests. Our $9.99 Big Yum value offered continues to resonate. Within our dining channel, it delivered 10% guest mix in the fourth quarter, strengthening our relevance with value-seeking guests and supporting incremental traffic and trial. Building on Nick's success, we expanded our platform with the January 26th launch of our new menu, integrating additional Big Yum deals directly into our core offerings. This expanded platform now features six meal options across a tiered price range of $9.99 to $16.99, extending beyond burgers into categories such as our hand-breaded classic crispy chicken sandwiches, Donato's pizza, and Whiskey River barbecue wraps. Importantly, each meal includes our signature bottomless sides and beverages, reinforcing value while preserving the full Red Robin experience. The new menu also broadens our premium offerings, creating a deliberate barbell approach that balances compelling value with higher-priced indulgent options to expand guest choice across day parts and occasions. Early results indicate that the menu is performing as expected and that average check has increased and remains healthy as guests engage across the menu. The second key driver of our fourth quarter traffic improvement was the deployment of incremental investment behind the data-driven first choice marketing strategy we initially introduced in Q3. This strategy enables us to engage guests more personally and precisely than traditional broad-based campaigns. We've now mapped every restaurant across six to eight competitive categories and clustered locations based on similar trade area dynamics and messaging needs. This analysis supports more focused and locally relevant messaging, allowing each restaurant to compete more effectively within its specific market. In short, we continue to transition from a broad one-size-fits-all approach to a marketing model that is more precise, more disciplined, and more efficient by ensuring that the right message reaches the right guests at the right time, improving the overall return on our marketing spend. The third pillar of our first choice strategy is find money. As discussed last quarter, our corporate efficiency actions have meaningfully reduced general administrative expenses, and those savings will continue to benefit us in 2026. For perspective, excluding stock-based comp, we reduced G&A by over $4 million in 2025 and expect to have a similar step down in 2026, driven by the efficiency initiative implemented in the middle of 2025. With respect to our work to strengthen our balance sheet and capital structure, we continue to progress on tactical re-franchising as a key enabler to this initiative. As previously communicated, we plan to use proceeds from any completed transactions to reduce debt and further strengthen our balance sheet. We're encouraged by the interest level expressed and the progression of discussions to date. We remain confident that we will achieve our targeted capital structure objectives. unrelated to our work to reduce debt, but as further reflection of franchisee confidence in our system improvements, three of our current franchise groups have indicated that they're currently pursuing new unit development opportunities within their territories. With respect to overall refinancing efforts, our improved financial performance has strengthened our liquidity position, and along with our progress on re-franchising, is expected to expand our options to improve our capital structure. We continue to work with our advisors to advance this process and expect to refinance our debt consistent with our previously outlined objectives. Additionally, as a result of improved business performance and further progress in our re-franchising work, we no longer believe that we need to preserve the option to conduct an at-the-market equity offering And so we have terminated the ATM program announced last November. No shares were issued under that program before it was terminated. Turning to our fixed restaurants pillar, in 2025, we completed 20 light touch refreshes to help our physical environment maintain competitive standards and reflects the quality of our food and service. Our 2026 capital plan allocates additional investment toward restaurant refreshes. We plan to resume refresh activity later in the first quarter, continuing a disciplined, light-touch approach designed to maximize guest impact. In addition to our facility refreshes, we begin to roll out replacement devices for our server handheld technology, and we'll also introduce an upgraded version of our Xeops tabletop devices. We believe that both of these actions will improve server efficiency, order accuracy, and speed of service returning the gift of time benefit that Red Robin has historically been known for. In the 10 months I've served as CEO, what stands out most for me is the growing sense of ownership and pride across our restaurants. Our team members are not simply executing initiatives, they are owning the challenge, putting guests at the front of everything we do, and actively contributing ideas that have improved operations and enhanced the guest experience. It's also important that we continue to challenge the status quo and identify insights and potential competitive advantages that will enhance our ability to differentiate ourselves in the marketplace. With that in mind, in the fourth quarter, we launched an enterprise version of the ChatGPT AI platform. Since our launch, we're seeing expanding utilization across the organization with tangible results. We're now in the process of introducing it to our managing partners along with custom GPT tools and are already seeing adoption and application that assist our managing partners in further optimizing labor costs, COGS, and guest service. The overall impact of our investments in our teams is tangible. Hourly turnover is now at its lowest level since 2017, and engagement scores continue to improve. This translates directly into how we serve our guests and support one another. As we look ahead, we'll remain focused on creating an environment where great people can build meaningful and rewarding long-term careers. To our entire Red Robin team, thank you for your continued commitment to our guests and to each other. The foundation we're building together positions us well to be able to capture the opportunities ahead. With that, I'll turn the call over to Chris to review our fourth quarter results.

Thanks, Dave, and good afternoon, everyone. I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2025. Total revenues in Q4 were $269 million, a decrease of $16.2 million from 2024. This change in revenue was primarily due to a decrease in comp sales and the impact of restaurant closures. Comp sales, excluding the impact of deferred loyalty revenue, were down 3.3% in Q4. including deferred loyalty revenue, comp sales were down 3.1%. This result was in line with the expectations we discussed in our last earnings call. Q4 comp sales included a 0.3% increase in average check, offset by a 3.6% decline in traffic. As it relates to other aspects of our Q4 financial performance, Restaurant-level operating margin was 11.4%, a decrease of 10 basis points compared to the fourth quarter of 2024. The benefits of cost savings, restaurant closures, and check average increases were offset by inflation and lower traffic. General and administrative costs were $14.9 million as compared to $18.4 million in the fourth quarter of 2024. The reduction is primarily due to reduced people costs from our corporate efficiency initiatives and lower stock-based compensation expense. Selling expenses were $8.8 million as compared to $5.7 million in the fourth quarter of 2024. Adjusted EBITDA was $11.8 million in the fourth quarter of 2025, a decrease of $2.6 million versus the fourth quarter of 2024. This result was ahead of expectations we discussed on our last earnings call. We finished 2025 with $69.7 million of adjusted EBITDA, which represented 53% growth over 2024. As it relates to our balance sheet and capital structure, we ended the fourth quarter with $19.9 million of cash and cash equivalents, $9.6 million of restricted cash, and $37 million available borrowing capacity under a revolving line of credit. Our strong results in 2025 have improved our liquidity and position us well heading into 2026. Turning to our outlook, we will now provide the following guidance for 2026. First, we expect comparable restaurant revenues to be between 0.5% and 1.5%, excluding the impact of deferred loyalty revenue. Second, restaurant-level operating profit margin of approximately 13%. Third, we expect adjusted EBITDA of between $70 million and $73 million. And finally, we expect capital expenditures to be between $25 million and $30 million. Our financial guidance suggests that we expect to make progress in 2026 across all of our key financial metrics. In summary, we are pleased with our financial performance in 2025. We have made significant progress towards increasing restaurant-level profitability, reducing debt, and growing EBITDA. We will remain disciplined in executing against the first choice plan in 2026 and continue strengthening the operational and financial foundation of the company. Dave, I will now turn the call back to you. Thanks, Chris.