Good Instances Eating places Inc. (GTIM) CEO Ryan Zink on This fall 2020 Outcomes – Earnings Name Transcript


Good Instances Eating places Inc. (NASDAQ:GTIM) This fall 2020 Earnings Convention Name December 15, 2020 5:00 PM ET

Firm Members

Ryan Zink – Chief Govt Officer

Convention Name Members

Walter Morris – Baraboo Progress LLC


Good afternoon, women and gents. Welcome to the Good Instances Eating places Inc. Fiscal 2020 Fourth Quarter Earnings Name. By now, everybody ought to have entry to the corporate’s earnings launch, which is accessible within the Traders part of the corporate’s web site.

As a reminder, part of in the present day’s dialogue will embrace forward-looking statements throughout the that means of federal securities legal guidelines. These forward-looking statements aren’t ensures of future efficiency, and due to this fact, you shouldn’t put undue reliance on them. These statements are additionally topic to quite a few dangers and uncertainties that might trigger precise outcomes to vary materially from what we anticipate, and due to this fact, buyers mustn’t place undue reliance on them, and the corporate undertakes no obligation to replace these statements to replicate the occasions or circumstances that may come up after this name.

The corporate refers you to the latest SEC filings for a extra detailed dialogue of the dangers that might affect our future working outcomes and monetary circumstances, together with dangers associated to the COVID-19 pandemic.

Lastly, throughout in the present day’s name, the corporate will talk about non-GAAP measures, which they consider will be helpful in evaluating our efficiency. Presentation of this extra data shouldn’t be thought-about in isolation or as an alternative to outcomes ready in accordance with GAAP and reconciliation to comparable GAAP measures obtainable in our earnings launch.

And now I want to flip the decision over to Ryan. Please go forward, sir.

Ryan Zink

Thanks, Matt, and thanks all for becoming a member of us on the decision in the present day. As all of you might be conscious, the COVID-19 pandemic continues to be an unpredictable and formidable problem for the nation and specifically for the informal eating segments of the restaurant business. I’m pleased with the efforts and the efficiency of the management and the staff members right here at Good Instances as we’ve tailored to the dynamic atmosphere that we discover our eating places now working in.

Our Good Instances enterprise, which very similar to the remainder of the business noticed an instantaneous contraction of gross sales in March and early April, noticed site visitors bounce again all through the rest of our fiscal yr as clients started adhere to drive-thru as a safer strategy to expertise restaurant eating. To that finish, we reported 10% comps for the quarter and practically 8% comps for the yr at Good Instances.

As well as, we’ve seen as evidenced by the 15% comps in October, and a 22% comps in our fiscal November that we’ve reported in our earnings launch, that this energy in gross sales has been maintained into the primary quarter of fiscal 2021. We additional consider that the main focus we’ve positioned on the pace of our drive-thru has resulted in repeat enterprise of former relapsed and even first time customers of the model as they know that even with the longer stack of automobiles within the drive-thru, our clients can depend on us to supply fast, correct service.

We concluded the fiscal yr with all the eating rooms in our Dangerous Daddy’s reopened fell at numerous ranges of occupancy limitations. We posted same-store gross sales declines of 12% for the quarter and 17.7% for the yr with the biggest decline having been through the fiscal third quarter. We approached flat comps in November, however with the closing of the eating rooms in Colorado late November and a usually elevated consciousness of the virus nationwide, we noticed same-store gross sales declines of roughly 8% throughout our fiscal month of November.

We consider that our product choice with daring flavors and burger builds that you simply simply can’t discover anyplace else, together with our dedication to scratch cooking and top quality components has aided us in retaining a good portion of our pre-pandemic gross sales.

Our menu was initially lowered throughout our first spherical of eating room closures, however we strategically added again current and even added some new objects to the menu with a deal with these objects that we may effectively execute in our kitchens, however that also represented our Dangerous Daddy’s model very properly.

We proceed to function our eating rooms at Dangerous Daddy’s in Oklahoma and within the southeast a part of the nation the place now we have not but seen new restrictions on indoor eating. In Colorado nevertheless, we closed our eating rooms at Dangerous Daddy’s in November in response to new restrictions positioned upon us by the state however has continued to supply on-premise eating at our current patios and in choose areas and expanded outside eating past these current patios.

Though most of our Dangerous Daddy’s patios already have been both partially or totally lined and had both electrical or gasoline heating now we have made investments to enhance heating and supply wind safety the place doable to develop the vary of climate circumstances during which outside eating is comfy and sensible for our friends.

As well as, we’ve seen that the restrictions on indoor eating has resulted in elevated site visitors at our Good Instances drive-thrus. All through the pandemic, to maintain our workers and friends protected, now we have carried out stringent practices to make sure that workers who’ve precise or suspected publicity to the virus don’t work in our eating places and that these which can be exhibiting signs of sickness of any type don’t work.

To that finish, now we have packages in place to supply for paid go away for all workers who’ve been uncovered or are presently exhibiting signs of COVID-19 and have had these packages in place since early within the pandemic.

We launched a digital model Dangerous Mama’s Rooster in November in a restricted variety of areas. This digital model is executed out of the present kitchens now we have in some Dangerous Daddy’s eating places and has been designed to leverage the culinary strengths that has been developed in Dangerous Daddy’s.

Whereas many firms are launching digital manufacturers, we envisioned Dangerous Mama’s as an extension of Dangerous Daddy’s specializing in our rooster wings and tenders, merchandise that we already make however merchandizing them individually underneath a rooster model to be able to create an idea folks will consider when they’re particularly on the lookout for rooster.

We consider that the ultimate product that we ship to our clients is differentiated from lots of the different digital rooster ideas as identical to Dangerous Daddy’s we use recent jumbo wings and recent rooster tenders at Dangerous Mama’s. We have now two leases that have been executed again in fiscal 2019 associated to anticipated Dangerous Daddy’s areas.

We labored with landlords in early fiscal 2020, even earlier than the pandemic emerged to delay development as we work to rebuild our steadiness sheet. We anticipate throughout fiscal 2021 to finish development on a location in Marietta, Georgia that we had beforehand began and to begin and full development on a location in Montgomery, Alabama.

We have now modified the plans for each of those areas to raised assist our off-premises enterprise by way of a devoted curbside entry manner and anticipate to moreover ship enhanced customer-facing and inter-restaurant order administration know-how at these areas. We additionally anticipate to start trying to find areas in current markets of the southeast to focus on for fiscal 2022 developments.

As indicated in our press launch, we anticipate growth to be in a extra modest tempo out of current money stream to take care of a powerful steadiness sheet and to make sure our operation groups aren’t underly harassed and lose deal with wonderful operations in our current eating places.

Let’s evaluation this quarter’s outcomes. At Dangerous Daddy’s, restaurant gross sales through the quarter have been $19.3 million, in comparison with $20 million throughout final yr’s fourth quarter. We had roughly 49 extra retailer weeks this quarter versus the identical quarter final yr, offset by lowered site visitors accompanying closed and lowered capability eating rooms related to the COVID-19 pandemic.

33 Dangerous Daddy’s have been within the comp base on the finish of the quarter. Price of gross sales at Dangerous Daddy’s have been 27.0% for the quarter, a 230 foundation level lower from final yr’s quarter, the results of larger common menu pricing related to a higher share of gross sales by way of our third-party supply providers, lowered waste related to menu optimization and usually favorable commodity pricing.

Dangerous Daddy’s labor prices decreased by roughly 480 foundation factors, in comparison with the prior yr quarter to 33.7% for the quarter. This year-over-year lower is primarily attributable to lowered entrance of home staffing ranges, accompanying restricted occupancy of eating rooms, improved again of home productiveness and the discount of administration staffing ranges from a mean of 5 managers per restaurant to 4 managers per restaurant.

General, restaurant stage working revenue, a non-GAAP measure for Dangerous Daddy’s was $3.3 million for the quarter or 17.1% of gross sales, in comparison with $2.7 million, or 13.3% final yr. This was attributable to enhancements in value of gross sales and labor, partially offset by gross sales deleverage of mounted value and elevated supply commissions, accompanying a better mixture of supply gross sales.

Eating places at Good Instances elevated to $9 million, pushed by sturdy optimistic comparable gross sales through the quarter. Meals and packaging prices for Good Instances have been 31.1% for the quarter, a lower of 10 foundation factors in comparison with final yr’s quarter. Good Instances had barely elevated commodity prices, offset by larger menu pricing and enhancements in product waste.

Complete labor value for Good Instances decreased to 31.8% from 35.9% of gross sales for the quarter final yr. This was the results of leveraging elevated gross sales, our deal with staffing for quantity and our pace of execution, which has improved labor productiveness.

Good Instances’ restaurant working revenue elevated by $0.5 million for the quarter. As a % of gross sales, the restaurant stage working revenue elevated by 480 foundation factors versus final yr to twenty.0%, due primarily to larger gross sales accompanied by decrease value of gross sales, decrease value of labor, and partially offset by larger value related to supply commissions.

Normal and administrative bills have been $1.6 million through the quarter, or 5.5% as a % of whole revenues. This represents a lower of $1.4 million versus the prior yr quarter and a 490 foundation level lower on a % of gross sales foundation. G&A bills for final yr’s quarter included $0.7 million of severance prices and roughly $0.3 million of non-cash inventory compensation prices related to the separation of a former CEO.

Moreover, this quarter’s G&A bills decreased attributable to bigger spans of controls at Dangerous Daddy’s, decrease supervisor coaching prices, in addition to lowered restaurant assist middle staffing, in comparison with the prior yr. We recorded the impairment of long-lived property of roughly $0.3 million associated to at least one Good Instances restaurant in a distant suburban market of Denver.

Our internet earnings for the quarter was $1.5 million versus a lack of $4.2 million within the fourth quarter final yr. Regardless of considerably decrease gross sales at Dangerous Daddy’s, incremental gross sales at Good Instances, enhancements in working efficiencies at each manufacturers and the comparability in opposition to non-recurring severance prices within the prior yr allowed us to ship considerably higher bottom-line outcomes.

For the yr, our internet loss was $13.9 million, primarily pushed by $15.6 million of goodwill and long-lived asset impairments.

Adjusted EBITDA for the yr was $7.6 million, in comparison with $5.4 million in fiscal 2019. We completed the yr with $11.5 million in money and $5.5 million excellent on our credit score facility with Cadence Financial institution, and $11.7 million in excellent Paycheck Safety Program loans.

Subsequent to the top of the yr, we closed one Good Instances restaurant that beforehand had impairment expenses recorded in opposition to it. That restaurant has been a marginal performer for years and we’re within the means of subleasing it to an unrelated social gathering. We offered steerage for the primary quarter of fiscal 2021 with internet earnings anticipated to be between $0.4 million and $0.6 million and adjusted EBITDA of $1.5 million to $1.7 million.

Our gross sales for the quarter at Good Instances have been sturdy solidly double-digit and our gross sales have remained equally sturdy in December. Gross sales have been within the mid to high-single-digit destructive vary at Dangerous Daddy’s and have softened a bit in December as the total affect of Colorado eating room areas – eating room closures have been realized and as site visitors basically has not seasonally elevated because of the discount in vacation buying at bricks and mortar outlets.

Regardless of softer same-store gross sales in October and November, we consider that Dangerous Daddy’s has continued to outperform the informal eating section as measured by NAFTrack and Black Field Intelligence.

We started the yr with a shift from development to retrenchment, discovered ourselves six months into the yr with the emergence of the pandemic that plunges into an existence of disaster, however with a mixture of agility, laborious work, Cares Act funding, and two sturdy ideas that resonate with our clients, we discovered ourselves on the finish of the fiscal yr ready to climate a difficult fall in winter, full two new eating places initially dedicated to in 2019 and start fascinated with future development.

On the similar time we remained firmly dedicated to fiscal self-discipline and a powerful steadiness sheet, a tradition that drives accountability and possession of outcomes in any respect ranges, a staff that embraces innovation, and in the end nice eating places which can be the end result of real hospitality and operations excellence.

With that, Matt, we’ll open the decision for questions.

Query-And-Reply Session


[Operator Instructions] Our first query comes from Walter Morris with Baraboo Progress. Please go forward.

Walter Morris

Thanks. Let me congratulate you Ryan, and the staff for this distinctive efficiency. There isn’t any doubt you might be performing manner above business requirements. So, congratulations. Nice efficiency. My particular query coupled a minimum of to begin, you might be doing an unbelievable job on G&A which G&A ranges roughly half of prior yr stage within the September quarter. How has that been achieved? And to what extent is that sustainable going ahead?

Additionally, with the anticipated two new shops in fiscal 2021, what sort of CapEx price range are we taking a look at in 2021, in comparison with anticipated money stream from the working enterprise?

Ryan Zink

Actually. So, Walter, thanks first for the congratulatory phrases. I undoubtedly admire it. Because it pertains to G&A, I might first spotlight that that final yr’s quarter did have the separation value related to our former CEO. And so these have been non-recurring value within the former yr. I might say that our G&A load proper now, we anticipate a little bit of further G&A spend and I might have a look at our nominal G&A {dollars} for this quarter and I feel on a quarterly foundation, we’d see a little bit little bit of accretion from that. However we don’t anticipate vital massive will increase in G&A.

I might say, we do anticipate to spend money on a brand new human useful resource administration system we anticipate to – which, our present one may be very antiquated. We anticipate to spend money on some new operations administration – operations efficiency measurement programs. And the opposite factor I might spotlight is we did make a few larger stage new hires.

We did rent a Director of Know-how who additionally serves as our innovation chief for the entire firm. We made that rent late within the quarter and we moreover employed an Assistant Controller shortly after the start of this primary quarter. So there may be little little bit of elevated G&A spend that we will anticipate. However I feel because it compares to our former ranges of G&A, I don’t suppose we’re instantly going again to that.

And I might additionally remark that because it pertains to type of the following two eating places we in all probability don’t want further multi-unit administration for that. Nonetheless, type of as soon as we add – as soon as we get into 2022, our stance of management might be at some extent the place we’ll have to begin making that call.

Now, because it pertains to your second query which was associated to CapEx, we haven’t offered steerage for the total fiscal yr and I’m reluctant to take action, on this name simply as highlighted within the launch there may be a lot uncertainty nonetheless that’s on the market.

Nonetheless, I might say, we anticipate through the first quarter that our EBITDA might be within the $1.5 million vary and I feel from a CapEx – and we’d anticipate I feel significantly later within the spring and summer time, we would definitely hope that the pandemic could be easing and among the restrictions might be easing by late spring and all through the summer time.

And so, I’d say, some that we’re assured in having the ability to proceed with these initiatives, I might say, now we have in all probability about $1.7 million to $1.8 million price of capital expenditures related to these two shops. We did start the Marietta location final yr and so we have already got some current CapEx associated to that.

Walter Morris

Glorious. Thanks. Once more, nice outcomes.

Ryan Zink

Thanks once more, Walter.


This concludes our question-and-answer session. I want to flip the convention again over to Ryan for any closing remarks.

Ryan Zink

Thanks once more, Matt. This yr’s outcomes are the direct outcomes of the upper ranges of collaboration and staff work by the staff that we’ve achieved prior to now and as at all times, I wish to thank the leaders inside Good Instances for his or her sturdy management and the whole staff whether or not leaders or particular person contributors for his or her energy by way of adversity.

Sharing a meal with others is almost is all this human society itself on this pandemic won’t eradicate our bodily have to eat neither is it going to destroy the emotional need to socialize with others over a meal. Our imaginative and prescient for our firm is to develop and develop ideas that present folks with a strategy to fulfill their bodily want for meals however greater than that to fulfill and improve the emotional achievement that so usually accompanies the meal.

I’m excited and assured sooner or later for eating places basically, however particularly for our ideas for Good Instances and for Dangerous Daddy’s. With that, we’ll conclude in the present day’s name. Thanks all for becoming a member of us in the present day. And I want you protected, and wholesome – want you well being and security on this time of the pandemic. Thanks.


The convention has now concluded. Thanks for attending in the present day’s presentation. You might now disconnect.