Twin Hospitality Group Inc.

which can be found in the investor section of the company's website at TwinPeaksRestaurant.com, among other places. Before we begin, I must remind everyone that part of the discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. Actual results may differ materially from those indicated by these forward-looking statements, due to a number of risks and uncertainties. Twin Hospitality does not undertake to update these forward-looking statements at a later date. For a more detailed discussion of risks that could impact future operating results and financial condition, please see today's earnings release and recent SEC filings. During today's conference call, the company will also discuss non-GAAP financial measures, which it believes can be useful in evaluating its performance. The presentation of this information should not be considered in isolation nor as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in today's earnings release. I also want to note that we will not be taking questions following our prepared remarks. I would now like to turn the call over to Ken Kueck, Interim Chief Executive Officer and Chief Financial Officer. Thank you, sir. You may begin.

Good afternoon and thank you for joining us today for our quarterly earnings call. We appreciate you taking the time to listen as we share our results and discuss our future plans. This past April marked a significant milestone for Twin Peaks as we celebrated 20 incredible years of serving scratch-made food, our signature 29 degree beer, and unforgettable experiences. From our humble beginnings to becoming a beloved destination for sports fans and food enthusiasts, our journey has been nothing short of amazing. Since our inception, Twin Peaks has grown exponentially, now boasting 116 locations across the United States and Mexico. This expansion underscores our robust business model and strategic growth initiatives. We owe the brand's success to our dedicated franchise owners, creators, and partners. Your unwavering commitment and industry expertise have been pivotal in driving our growth and maintaining our high standards. 20 years of creating memories, sharing victories, and delivering the ultimate dining experience, and this is just the beginning of our story. With a solid foundation and a focus on innovation, Twin Peaks is well-positioned for continued growth and success in the years ahead. As we previously announced, Joe Hummel concluded his journey as CEO of Twin Peaks last month. His leadership set a strong foundation as we move forward with our growth plans. We will carry the torch forward, having already opened two new lodges in 2025, and are now targeting a total of three to four new units this year, while building on our robust 100-unit development pipeline. While our search for a permanent CEO continues, I am excited to have stepped into the role of interim CEO during this transition period. I'm thankful to be surrounded by a strong team who are in place and have a tenured history with the brand. Now, here are the highlights from the first quarter results. We'll go into greater detail during the financial review. First, despite a challenging sales environment, we increased system-wide sales at Twin Peaks by 5.1% to $146.2 million, driven by the strength of our new company-owned restaurants. Second, with only moderate pricing, restaurant-level margins at Twin Peaks were 16.9%, down only slightly compared to 17.4% last year. These factors resulted in $6.3 million of adjusted EBITDA at Twin Peaks. Like others in the industry, first quarter same-store sales were negatively impacted by weather and other macroeconomic factors. As a result, Twin Peaks same-store sales decreased 1.5% in the quarter, consisting of a 2.7% decrease at company locations and a 1% decrease at franchise locations. Notably, same-store sales improved sequentially throughout the quarter as we generated a 0.4% increase during March, driven in part by the NCAA Championship Basketball Tournament and the Easter shift from the first quarter of last year to the second quarter of this year. Looking ahead, we are particularly excited about our upcoming promotional calendar and the major sporting events scheduled throughout the remainder of the year, which I'll detail shortly. Moving on to development, during the first quarter, we opened two new Twin Peaks lodges. First, we completed our second company-owned Smokey Bones conversion in Brandon, Florida, part of the greater Tampa area. This is our 16th location in the high-performing Florida market. Next, we opened our 116th unit, a franchise lodge in Algonquin, Illinois, part of the greater Chicago market, further strengthening our national footprint. Both new lodges are off to a very strong start. Currently, we have two Smokey Bones conversions under construction, consisting of a company-owned lodge in Kissimmee, Florida, and a franchise location in Fayetteville, North Carolina. And looking ahead to early 2026, we will enhance our presence in Florida with an additional company-owned conversion in Citrus Park. Our expansion strategy is fueled by a pipeline of 100 franchise agreements with current franchisees accounting for approximately 75% of this projected growth. And we continue to strengthen this pipeline. For example, we kicked off 2025 with a strategic five unit development deal that will introduce our brand to the untapped markets of South Dakota and Montana. Now let's turn to our current sales driving initiatives. We launched our new bar menu in early February featuring 19 premium handcrafted cocktails, creative mixed shots, and top tier bourbon and tequila that align with current beverage trends. We also have some exciting new promotions around our tequila and margaritas that we will feature this summer with local specials unique to each lodge. At Twin Peaks, we leverage our local sports lodge feel by building strong connections within each community through grassroots marketing. This consists of local promotion teams activating in and around each lodge, along with unique media tactics crafted for each local market to tap into local sports occasions. Our focus on high-margin beverage sales continues to drive exceptional performance, with alcohol comprising nearly 50% of restaurant revenue, two to three times higher than typical casual dining competitors in the bar and grill segment. Our strategic barbell pricing approach balances accessible entry-level options with premium offerings, enabling us to serve guests across price points while maintaining exceptional value at entry level. We have some exciting food innovations on the horizon this year. Since burgers, wings, and flatbreads make up a significant part of our food mix, we will feature trendy new wing sauces and premium new toppings on our burgers and award-winning flatbreads to keep these items new and delicious. Through secured, fixed pricing agreements for burgers and the inherently cost-effective nature of our flatbread program, these Czech-friendly menu innovations are designed to maintain brand relevance while ensuring long-term financial sustainability. Before football season kicks off, we will introduce a collection of on-trend sauces to complement our wings, which are currently benefiting from favorable market pricing. We leveraged this opportunity with a compelling wing promotion, buy six wings, get six free, transforming a traditionally slower business period into a value-driven occasion for guests. Sports are an integral part of the Twin Peaks business. Our marketing strategy is centered around major sporting events, strategically enhanced with additional promotions and programming to create a comprehensive calendar that maintains engagement between these marquee sports moments. During the quarter, our lodges were bustling with energy as guests cheered on their favorite NCAA teams during the basketball tournament. We offered exciting promotions that drove repeat visits. In the second quarter, we are featuring six to seven major boxing and UFC matchups, which are known to attract significant crowds to our lodges. Additionally, we are capitalizing on the excitement of the NBA playoffs and the extensive two-month NHL playoff season to further boost traffic to our sports bars. This summer, we are planning soccer programs around the FIFA Club World Cup with Champions League events in April and May, leading into Club World Cup promotions in June, which will help to position Twin Peaks as the top sports spot for the 2026 World Cup. In the fall, we will focus on fantasy football drafts, NFL, and college football watch parties. We will complement this programming with heavy sports radio marketing and endorsers to solidify Twin Peaks' position as the ultimate sports lodge for football season. Before I move on to our full financial review, I wanted to share that in April, Twin Peaks was awarded the Black Box Intelligence 2025 Voice of the Customer Award for the full service sector. Nominees are evaluated on their performance across key customer experience benchmarks, including service, food and beverage, ambiance, value, and intent to return. Winners are determined by their overall guest sentiment and star ratings collected throughout the year. Our guests exhibit strong brand loyalty as demonstrated by our black box intelligence scores. For Black Box Intelligence data, our scores are higher in every category relative to the broader casual dining segment, validating our relative brand strength. We couldn't be prouder to win this prestigious award. This award underscores Twin Peaks' unwavering commitment to an exceptional guest experience, which defines our brand and drives our continued success. Each of our lodges provides a rugged lodge atmosphere, a state-of-the-art sports viewing experience, and premium dining. This creates an unparalleled entertainment destination and enables us to generate consistent customer traffic across all day parts, including lunch, happy hour, dinner, and late night. In summary, 2025 marks an exciting new chapter for us, and we are just getting started. We have a strong, tenured team, an under-penetrated brand that offers exceptional experiences while providing value to our franchisees and shareholders. Moving on to our first quarter results, our system-wide sales, which includes both Twin Peaks and Smoky Bones, were $182.3 million, a 0.4% decrease from last year's quarter. Of the total, Twin Peaks system-wide sales were $146.2 million in the quarter, an increase from $139.1 million in the prior year quarter, driven by new Twin Peaks lodges that have opened since the first quarter of 2024. Total revenue was $87.1 million in the quarter, a 5.4% decrease from $92.1 million in last year's quarter. Looking at revenue between Twin Peaks and Smoky Bones, Twin Peaks revenue was $51 million in the quarter, up $2.9 million or 5.9% from $48.1 million in the prior year quarter. The increase was driven by the openings of new lodges, partially offset by a 2.7% decline in same-store sales. Smokey Bones revenue was $36.1 million in the quarter, down 17.8% from $43.9 million in the prior year quarter. Smokey Bones revenue declined as we continue our strategic conversion of Smokey Bones locations into Twin Peaks Lodges, which requires temporary closures. And as a reminder, approximately half of our Smokey Bones locations are part of this transition plan. Since the first quarter of 2024, we have completed the conversion of two Smokey Bones locations into Twin Peaks Lodges, and those units are generating significantly higher AUVs than they did as Smokey Bones locations. Our third conversion is under construction and is expected to open later this year. And finally, we closed three of the nine underperforming Smokey Bones locations identified at the end of the year. Total company-owned restaurant sales were $78.4 million in the quarter, a 5.9% decrease from $83.3 million in last year's quarter. This decline was attributed to the closure of three underperforming Smokey Bones locations, the temporary closure of one Smokey Bones location for conversion into a Twin Peaks Lodge, and lower same-store sales. This was partially offset by the opening of new Twin Peaks Lodges. Franchise revenue remained steady at $8.7 million in the quarter compared to last year's quarter, as growth from our new Twin Peaks franchise openings offset the decline in same-store sales. Turning to costs and expenses, food and beverage costs in the quarter were up 20 basis points to 27.1%, as higher food costs were substantially offset by menu price increases. Commodity inflation during the first quarter was in the low single digits, and we expect these trends to continue for the remainder of 2025. Labor and benefits costs in the quarter increased 30 basis points to 32.2%, as wage inflation and sales deleveraging were mostly offset by menu price increases and labor efficiencies. Other operating costs increased 180 basis points to 21.5% in the quarter compared to 19.6% in the prior year quarter due to sales deleveraging. Occupancy costs increased 10 basis points to 8.1% in the quarter compared to 8% in last year's quarter, primarily due to the sales deleveraging. Turning to restaurant level contribution margin, In order to be comparable with industry peers, we are now excluding advertising expenses or selling expenses of approximately 250 basis points from the calculation and have also adjusted the prior year quarter to reflect this change. Restaurant level contribution margin decreased 240 basis points to 11.2% from 13.6% in last year's quarter. And looking at individual brand performance, Twin Peaks restaurant-level contribution margin decreased 50 basis points to 16.9% from 17.4% in last year's quarter, reflecting a decline in same-store sales. Smokey Bones restaurant-level contribution margin decreased 570 basis points to 4.4% from 10.1% in last year's quarter, As we continue to close higher performing Smokey Bones locations for conversion into Twin Peaks Lodges, we expect continued pressure on Smokey Bones restaurant level contribution margins. Advertising expense decreased 65 basis points to 5.8% from 6.5% in last year's quarter due to a slowdown in advertising spend at Smokey Bones. General and administrative expenses remained relatively flat at $6.8 million compared to $7 million in the year-ago quarter. Total other expense net, which consisted primarily of interest expense, was $10.8 million compared to $10.5 million in last year's quarter. Net loss in the quarter was $12.1 million compared to $9.2 million in last year's quarter. Adjusted EBITDA decreased to $5.1 million compared to $7.1 million in last year's quarter. Twin Peaks adjusted EBITDA was $6.3 million compared to $7 million in last year's quarter. And Smoky Bones adjusted EBITDA was negative $1.2 million in the quarter compared to a positive $0.8 million in last year's quarter. And turning to the balance sheet, following our bond refinancing in the fourth quarter of last year, we committed to raising between $75 and $100 million of equity in 2025 and using 75% of that to reduce outstanding debt. While we anticipated securing the first one-third of that amount by April, the current volatile market conditions have impacted our near-term ability to do so at reasonable price. Despite this temporary time and adjustment, we are confident in achieving our full annual equity target raise over the next 12 months. With that, I would like to thank you again for your interest in twin hospitality.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.