RED ROBIN GOURMET BURGERS INC Q3 FY2024 earnings call

• Loyalty 2.0 relaunch: Launched in May 2024, exceeding expectations with more sign-ups, frequent visits, and higher spending per visit. Over 400,000 lapsed members reengaged. - Appointment dining: Promotions like Monster Monday (Monster size items at reduced prices), $10 gourmet cheeseburger on Tuesdays, 50% off kids meals on Wednesdays to drive traffic on less busy days. - Guest experience: OSAT scores up over 13 points since North Star plan began, highest since 2016 and above industry average. Investments in food quality, service, and hospitality. - Marketing: Efficient use of marketing spend with targeted messaging, leveraging loyalty program and creative promotions like Triple-Patty Gold Medal Burger challenge tied to Olympics. - Restaurant portfolio: ~70 underperforming restaurants drag on profitability, but working to support these locations to improve their performance.

In the third quarter, total revenues were $274.6 million versus $277.6 million in the third quarter of fiscal 2023. Comparable restaurant revenue increased 0.6%. Restaurant-level operating profit as a percentage of restaurant revenue was 9%, a decrease of 210 basis points compared to the third quarter of 2023. Adjusted EBITDA was $2.1 million in the third quarter of 2024, a $4.7 million decline versus the third quarter of 2023.

• Total revenue expected approximately $1.25 billion. - Restaurant-level operating profit at least 10.5%. - Adjusted EBITDA $35 million to $37.5 million. - Q4 expectations: Traffic decline ~4%, PPA increase ~6%, deferred loyalty revenue headwind of ~$4.5 million, 52-week fiscal year impact resulting in ~$25 million reduction in restaurant sales and ~$3 million reduction in adjusted EBITDA compared to 2023. - Favorable factors: PPA benefit, ~$11 million reduction in selling and G&A expenses, continuing cost savings in supply chain and operations.

• Macroeconomic challenges affecting consumer spending on dining. - Performance of the 70 underperforming restaurants dragging on overall profitability. - Dependence on successful execution of the North Star plan and loyalty program to drive traffic and profitability.

Q: Todd Brooks from The Benchmark Company asked about the Cheeseburger Day Triple Play and Loyalty 2.0 expiration.

A: G.J. Hart stated the Triple Play is stacked on existing promotions, and Todd Wilson mentioned loyalty program performance has been ahead of internal modeling with strong reward redemption.

Q: Alex Slagle from Jefferies asked about discounting level and underperforming units.

A: Todd Wilson said discounting was ~4% pre-North Star plan, now higher due to strategic traffic-driving efforts; the 70 underperforming units drag restaurant level profitability by over $6 million annually.

Q: Alex Sturnieks from Lake Street Capital asked about Q4 comps and operations changes.

A: Todd Wilson and G.J. Hart discussed Q4 seasonality being backloaded, and operations changes including supply chain cost savings, hot schedule labor management, and monitoring cohorts for best practices.

Q: Unidentified Analyst from Craig-Hallum Capital Group asked about Q4 seasonality and loyalty impact on marketing budget.

A: G.J. Hart said Q4 is backloaded, and loyalty program allows more targeted and efficient marketing messaging.

Q: Andrew Wolf from C.L. King asked about Q4 seasonality and operations efficiency.

A: Todd Wilson and G.J. Hart discussed Q4 seasonality trends and operational efficiency measures like supply chain savings, hot schedule labor management, and best practice sharing among restaurants.