Red Robin Gourmet Burgers, Inc.

Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers Incorporated First Quarter 2026 earnings call. This conference is being recorded. During management's presentation and in response to your questions, they will be making forward-looking statements among 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 first quarter 2026 earnings release on its website at ir.redrobin.com. On today's call are Dave Pace, President and Chief Executive Officer, Mark Graff, Chief Financial Officer, and Chris Meyer, Interim Chief Financial Officer. Now, I would like to turn the call over to Dave Pace.

Good afternoon, everyone, and thank you for your interest in Red Robin. I'm pleased to report that our first quarter results demonstrate continued improvement in the business, highlighted by our strongest traffic performance since the first quarter of 2023 and our highest Q1 restaurant operating profit margin since 2021. These results reinforce that the actions we're taking to strengthen guest engagement are gaining traction. Our Big Yum value platform continues to resonate with guests with high satisfaction scores, and we're seeing strong results across the system. In addition, our targeted first choice marketing efforts are improving both reach and brand awareness, helping us to engage guests more effectively to drive frequency. Importantly, the operational discipline embedded in our first choice plan is delivering steady improvement across the P&L as well. Our teams remain focused on executing the fundamentals, enhancing the guest experience, and positioning the business for sustainable growth. As it relates to our Q1 performance, same-store sales were down 0.6%, including a 1.0% increase in average check and a 1.6% decrease in traffic. This traffic result improved sequentially from Q4 and continued to narrow the traffic gap to the industry as compared to black box intelligence, reinforcing that our strategies are gaining traction despite a challenging macro environment. The current economic environment requires that we remain deliberate in highlighting value and disciplined in our approach to average check. Q1 was our third consecutive quarter where our check average increases were below the industry. Our prudent approach to menu pricing, complemented by the expansion of our big, young platform, has positioned us for success and is reflected in our traffic momentum. Turning to profitability, We're pleased with the continued incremental gains in four-wall efficiency, including a 50 basis points improvement in restaurant level operating margin to 14.8%. This was our highest first quarter margin in five years. Our adjusted EBITDA was in line with our expectations, and we remain on track for our full year objectives. With that, let me update you on our first choice plan and how we're thinking about our strategic priorities for the remainder of the year. First, let's start with HoldServe. Our team continues to do a great job sustaining the progress we've made in the past several quarters, and this quarter is no different. During the first quarter, our labor efficiency initiatives drove approximately 130 basis points of year-over-year savings. Our labor percentage of 35.7% was our lowest first quarter labor in three years. These improvements reflect the sustained accountability and ownership embedded in our managing partner mob. What's particularly encouraging is that we're achieving these efficiency gains without compromising the guest experience. Our satisfaction scores remain strong, reinforcing that operational excellence and genuine hospitality are not competing priorities. They're complementary. Moving to our drive traffic pillar, We believe our value and innovation platforms are gaining traction with guests. The expanded Big Yum platform we launched in late January continues to address the need for value with the new offerings while serving as an incremental traffic driver. All in all, the six meal options across our $9.99 to $16.99 price range are strengthening our relevance with value-seeking guests and supporting incremental traffic and trials. In total, our Big Yum offerings are mixing at over 13%, well within the expectations for this program. The platform's appeal extends beyond burgers, including our hand-breaded classic chicken sandwiches, Donato's pizza, and Whiskey River barbecue chicken wraps. Importantly, each meal includes our signature bottomless sides and beverages, reinforcing value while preserving the full Red Robin experience. Overall, the underlying traffic trends in the business are improving and our momentum is increasingly being driven by compelling platforms rather than relying on traditional discounting. Our deliberate barbell approach with the menu balances compelling value with higher priced indulgent options to expand guest choice across day parts and occasions. We believe this approach is building a more sustainable foundation for traffic generation. In addition, We continue to enhance our new product pipeline, which provides additional opportunities to drive frequency. An example of this is our towering sliders that we launched last month, which has generated record setting menu satisfaction scores and is driving incremental check growth. On the marketing front, our data-driven first choice strategy continues to gain traction. Our ability to deliver locally relevant messaging based on competitive dynamics in each trade area has improved both engagement and marketing efficiency. We're seeing the benefits of this more precise, disciplined approach in our traffic performance and expect to build on this momentum as we refine our capabilities throughout the year. Now let me update you on our third pillar of the first choice strategy, find money. I'm pleased to report that our momentum on corporate efficiency initiatives continues to deliver meaningful results. As we previously outlined, the G&A reductions we implemented in mid-2025 are providing sustained benefits, and we remain on track to realize the full-year step-down we anticipated for 2026. Turning to our balance sheet optimization efforts, our tactical refranchising initiatives continues to move forward. We're currently in the final stages of discussions with multiple parties, and I'm pleased with both the pace of these conversations and the depth of engagement from prospective franchisees. These are sophisticated operators who recognize the operational progress we've made and see the opportunity that our first choice strategy creates. The sustained level of interest we're seeing reflects growing confidence in our system improvements and the strength of the Red Robin brand. I want to emphasize that we remain committed to being disciplined and selective in this process. Our objective is to partner with franchisees who share our commitment to operational excellence and guest experience while achieving terms that support our balance sheet objectives. We plan to use proceeds from any completed transactions to reduce debt and further strengthen our balance sheet. We look forward to providing further updates on this in the near future. Turning to our fixed restaurants pillar, we're continuing our light touch refresh program in 2026. This initiative touches customer facing elements within our restaurants that can enhance the overall experience and support the quality of our food and service. We expect to have our first markets completed by the end of June. In addition to our facility refreshes, we've begun to roll out replacement devices for our server handheld technology, and will shortly introduce an upgraded version of our Xeos 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. Lastly, let me quickly touch on our win-together pillar. As I reach the one-year mark as CEO of Red Robin, what stands out most for me is a growing sense of ownership and pride across our restaurants. Our team members are not simply executing initiatives, they're 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. We also recognize that the rate of change continues to accelerate and evolve and we need to adapt with it. Technology and AI are at the forefront of that discussion and our team is constantly challenging the status quo to identify ways to enhance our capabilities reduce friction, and differentiate ourselves in the marketplace. Last fall, we introduced an enterprise version of the ChatGPT AI platform, and we're seeing meaningful adoption of the tools across the enterprise, but especially within the field. Our managing partners are actively leveraging these tools to optimize labor scheduling, manage food costs, and enhance guest service delivery. all of which are contributing to the operational efficiencies reflected in our results. On the people front, our focus on creating a supportive work environment continues to pay dividends. Hourly turnover remains at historically low levels, and employee engagement scores are tracking positively above industry benchmarks. This stability strengthens our ability to deliver the consistent, high-quality experience our guests expect. As we progress through 2026, we remain committed to fostering an environment where great people can build meaningful careers while driving the innovation and execution that will differentiate Red Robin in the marketplace. To our entire Red Robin team, thank you for your continued commitment to our guests and to each other. The operational discipline and guest-first mindset you demonstrate every day are the foundation of our progress, and I'm grateful for your commitment as we execute our first choice plan. Before I turn the call over to Mark, I'd like to extend my sincere thanks to Chris Meyer for stepping out of retirement to serve as our interim CFO. Since December, Chris has provided strong continuity, steady leadership, and valuable guidance to our finance team and the entire organization, including me personally. I'd also like to welcome our new CFO, Mark Graff, who just joined us earlier this month. With more than a decade at Blumen Brands, he brings deep financial expertise and direct operational leadership to the team. I had the privilege to work with Mark when we were both at Blumen. He's been working closely with Chris over the past several weeks as he comes up to speed, and we look forward to his leadership and perspective as we continue to execute on our first choice plan. With that, I'll turn the call over to Mark to review our first quarter results.

Thanks, Dave, for the kind words and good afternoon, everyone. I'd like to start by providing a recap of our financial performance for the fiscal first quarter of 2026. Total revenues in Q1 were $378 million, a decrease of $14 million from 2025. This change in revenue was primarily due to the impact of restaurant closures and a decrease in comp sales. Comp sales, excluding the impact of deferred loyalty revenue, were down 60 basis points in Q1. Q1 comp sales included a 1% increase in average check, offset by a 1.6% decline in traffic. The 1% increase in average check consisted of a 3.1% increase in price, offset by a 2.1% decrease in mix and discounts, driven largely by the impact of our big young value offerings. As it relates to other aspects of our Q1 financial performance, restaurant-level operating margin was 14.8%, an increase of 50 basis points compared to the first quarter of 2025. The benefits of cost savings and labor efficiencies, check average increase in restaurant closures were offset by inflation and lower traffic. As it relates to our commodity basket, as of the end of the first quarter, we were approximately 60% locked on our 2026 commodity needs. General and administrative costs were $23 million as compared to $27 million in the first quarter of 2025. The $4 million reduction is primarily due to reduced people costs from our corporate efficiency initiatives and timing of corporate events. Selling expenses were $13 million as compared to $9 million in the first quarter of 2025. Adjusted EBITDA was $27.3 million in the first quarter of 2026, a decrease of $0.6 million versus the first quarter of 2025. As it relates to our balance sheet and capital structure, we ended the first quarter with $24 million of cash and equivalents, $10 million of restricted cash, and $17 million available borrowing capacity under our revolving line of credit. Turning to our outlook, we are maintaining the full-year guidance for 2026. Please note that our outlook does not include any impact from the tactical re-franchising initiatives. 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. Finally, we expect capital expenditures to be between $25 million and $30 million. In summary, our first quarter performance marked our continued improvement in our business fundamentals. As we look ahead, To the remainder of 2026, we will remain disciplined in executing against the first choice plan and continue strengthening the operational and financial foundation of the company. Dave, I'll now turn the call back to you.