RED ROBIN GOURMET BURGERS INC Q1 FY2025 earnings call

• G.J. Hart recapped progress over the past 2.5 years including the managing partner program, elevated guest experience through food and hospitality upgrades, optimized loyalty program with ~15.3 million members by end of Q1, and growth in comparable restaurant revenue and unit level profitability.
• Dave Pace outlined initial priorities: retain and extend operational execution for high-quality guest experience and improved operating efficiency, return to sustainable traffic growth with creative marketing, strengthen financial position by reducing debt and increasing free cash flow, and reinvest in restaurants to match upgrades in food quality and hospitality. Russ Klein joined to build marketing foundation and strategy.

In the first quarter, total revenues were $392.4 million, an increase from $388.5 million in the first quarter of fiscal 2024. Comparable restaurant revenue increased by 3.1%, led by a 6.8% increase in net menu price, offsetting a 3.5% decline in guest traffic. Restaurant level operating profit as a percentage of restaurant revenue was 14.3%, a 330 basis point increase compared to the first quarter of 2024. Adjusted EBITDA was $27.9 million in the first quarter of 2025, an increase of $14.5 million versus the first quarter of 2024. General administrative costs were $27 million, selling expenses were $9.4 million, and the company ended the first quarter with $24.2 million of cash and cash equivalents.

• Total revenue guidance: $1.21 billion to $1.23 billion (previously $1.225 billion to $1.25 billion).
• Restaurant level operating profit: 12% to 13% (in line with prior guidance).
• Adjusted EBITDA: $60 million to $65 million (in line with prior guidance).
• Capital expenditures: Approximately $30 million (consistent with prior range). Guidance incorporates anticipated traffic trends and tariff pressure.

• Broader macro and consumer environment impacting guest traffic trends.
• Tariff policies creating a cost headwind that affects profitability.

Q: Just wanted to lead off, and it's a question about the profitability that you guys were able to generate in Q1. I know, Todd, you talked about some anticipated pressure from eating tariffs versus pricing for them on the menu. That's in the 12% to 13% guidance range for restaurant level margin. But obviously, that's a very fluid situation as well. So just wanted to understand the efficiency that you generated in the first quarter but kind of maintaining that full year guidance in the 12% to 13% range. Is that purely the tariff pressure or is there something else there as well?

A: Yes, a few things I think I'd call out there. One, we were really encouraged in Q1 and that's part of the way that we beat it. It's frankly the primary way that we beat our profit expectation in Q1. Our team really got after labor quickly and we saw a lot of fast progress there, faster than we expected. So that's been really encouraging. To your question though, as we thought about the balance of the year, traffic, you may have seen in the press release, traffic in the first quarter was down 3.5 points. We talked about it last time. And so we've kind of carried forward a down 4 traffic rate through the balance of the year. That's a haircut to what we had in our original expectations. And so that's what's -- that plus the tariffs, which you alluded to. But it's really just I think a prudent haircut on the top line that's what's driving us to hold the guidance for the year. The other piece as well is, we're still early in the year, right? We've got a long way to go here. It's important to us that when we put out a number, we're confident we're going to deliver it. And so you'll be see us be prudent there, but those are really the moving parts of traffic and the tariffs.

Q: Another one for Todd, if I can. Can you walk through -- you talked about menu price contribution water falling as the year goes on. Can you walk through how that proceeds for Q2, Q3 and Q4?

A: Todd, we have talked about this before. And as you really kind of look at that progression through the year, we were almost 7 points of contribution in Q1 and we do expect that that will wind down through the year. As we said on the call, we don't anticipate taking any further pricing action this year. When you look at the quarterly sequencing -- I'll talk in terms of just total check growth. When you put price, mix, discounts altogether, we're looking for about 4% check growth in Q2, 4% in Q3 and then as pricing falls off, it will be about 2% in Q4 is our expectation.

Q: And then one more strategic question, and I'll hop back in queue. If -- we're getting close to being a year into the changes in the loyalty program, if you guys look at the results so far, it seemed like really kind of encouraging results out of the gate, and we've still seen growth in the program. But have the unlocks around frequency played out the way you expected or either G.J. on the way out or Dave on the way in? How much more opportunity is there to lever Red Robin royalty more effectively in '25?

A: I would tell you that we are seeing the same kind of increase that we talked about last quarter. And I'll also tell you that some of these numbers, like 22% of our visits are from lapsed users, that's a really good number in terms of our visits overall. And we're holding fairly close to new guests being 20% of our visits. So this program is really working. And I think as we dial this thing up further, there's further opportunity here, but I'll let Dave.

Q: What do you guys think like high level we think about the handoff and leadership kind of leveraging each of your unique skill sets, and we've seen a great foundation put in place over the last couple of years, the North Star plan and as we transition Dave to your leadership. What really changed, is there anything we should think about from this perspective going forward?

A: I mean, I'll start off and I'll let G.J. jump in. We're both smiling, because it's -- we have a pretty close philosophy on how we think about restaurants. And so this has been a pretty smooth transition all the way around. I want to say again thanks to G.J. for the collaboration and the work we've done together on this. I think it's tonality. I think it's focus. I mean, G.J. came in and did the right things that this business required when he came in, and he did a reset on labor and operations focus and he did that. He needed a reset on food and he did that and he needed a reset on culture and he did that. He put all those things in place that anyone coming in would love to have as a foundation to build on. And I think that's how I look at it. In terms of my areas of focus is the things we talked about. And I don't think they're dramatically different from where G.J. was going, right? We're going to figure out how to bend the curve on traffic. We're going to hold serve on operations. We're going to look to be the first choice for consumers when they want to go out and have a burger. We are going to give ourselves some financial flexibility on the balance sheet and then we are going to use some funds to fix the restaurants. And I think those are not a lot different than what you would have seen from G. J. and I think we can continue that ball forward and keep moving this business back. But I think those are the important points and the way we got after them I think are the right sequence.