Ruth's Hospitality Group, Inc.

Good morning, ladies and gentlemen. Welcome to today's Ruth's Hospitality Group Second Quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Following the company's formal remarks, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Christy Chipman, Chief Financial Officer. Please go ahead.

Thank you, and good morning, everyone. Joining me on the call today is Cheryl Henry, our president, chief executive officer, and chairperson of the board. Before we begin, I'd first like to remind you that part of our discussion today will include forward-looking statements. These statements are not guarantees of our future performance, and therefore, undue reliance should not be placed upon them. We would also encourage you to refer to the investor relations section of our website at rhgi.com. as well as the SEC's website at sec.gov for copies of today's earnings press release and our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating and financial results. During this call, we will refer to adjusted earnings per share. This non-GAAP measurement was calculated by excluding certain items. We believe that this measure represents a useful internal measure of performance. You can find a reconciliation of adjusted earnings per share in our press release for today's call. I would now like to turn the call over to the company's Chief Executive Officer, Cheryl Henry.

Thank you, Christy. Good morning and thank you for joining us today. Let me begin by saying how proud I am of our team and franchise partners as they continued to put forth extraordinary effort and outperform in a challenging and ever-changing environment. As you know, the pace of recovery began to accelerate during the second quarter and we witnessed our guests enthusiastically coming back to dine in our restaurants. With the opening of our restaurants to greater capacity in recent weeks, our teams and franchisees have remained resilient and committed to providing our guests with the hospitality that Ruth is known for, while also making sure they feel safe in our restaurants. I truly believe their focus on operational excellence and unparalleled hospitality is the reason our brand continued to recover well during the second quarter. To that point, I'm pleased to report we achieved strong sales performance with comp sales up 5% despite capacity restrictions that were in place for much of the quarter. Excluding the impact of Boston, Hawaii, and Manhattan, comps were up 11.1%. That sales momentum for the entire system continued in July with comps for the first four weeks of the period up approximately 17%. Our franchise partners also performed well, delivering comp growth of 7.5% and domestic franchise comp sales increasing 17.3%. From a profitability standpoint, we continue to benefit from the labor efficiency initiatives we implemented in late 2019. I'm thrilled that this has resulted in the strongest standalone quarter since Q4 of 2018. It's also the best Q2 margin in over five years. Having said that, we are keenly aware that the external environment remains uncertain in the short term and that inflationary pressures are challenging. We are confident, however, that with the accelerated demand for our legendary experience, the trust our guests have in our brand, and our team's ability to manage the business, we will weather any near-term impacts and remain committed to investing in the long-term future of our business. To that end, we are on schedule to open two to three company-owned restaurants by year end, including sites in New Jersey and Long Island, New York. In addition, we recently signed a management agreement for a new restaurant that will open in the Soaring Eagle Casino in Mount Pleasant, Michigan in 2022. Looking ahead, we expect to have seven company-owned or managed restaurant openings by the end of 2022, and we'll continue to evaluate additional opportunities for development. On our last call, we reiterated the commitment we made in 2019 to invest strategically in our technology platforms and digital future. As a reminder, in 2019 we stated that our focus for these investments are reducing the friction in the experience for both our guests and our team members, enhancing our hospitality to drive frequency, and increasing productivity and efficiency to optimize margin. We have made meaningful progress during the quarter, beginning with the implementation of foundational technologies, including new POS and labor management systems. We continue to focus on maintaining a healthy balance sheet and will evaluate all options to maximize shareholder value over the long term. That means smartly allocating capital to grow and create value for all our stakeholders, which remains our longstanding goal. On top of our list is further debt reduction for the remainder of this year, as well as investing in and opening the seven new units through calendar 2022. At the same time, we will continue that investment in data and digital transformation because the future of Ruth's Crisp will be driven by better understanding our guests and the use of technology to improve their brand experience. Finally, we will continue to evaluate reinstating our dividends as well as future share repurchases as we gain more visibility through the back half of the year. We are fortunate that the performance of our teams has allowed us to satisfy our leverage covenants so that we are able to consider these additional options going forward. All in all, we are a stronger and more nimble enterprise, and we are excited about the future. I'm grateful to our team members and franchise partners that deliver excellence every day. I will now turn the call over to Christy Chipman.