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Good Occasions Eating places Inc. (GTIM), the dad or mum firm of Good Occasions Burgers & Frozen Custard and Dangerous Daddy’s Burger Bar chains, reported a 6.5% improve in complete revenues to $37.9 million for the third quarter of fiscal 2024. The corporate skilled same-store gross sales development throughout each manufacturers, with Good Occasions at 5.8% and Dangerous Daddy’s at 1.2%. The quarter was additionally marked by a rise in labor and occupancy prices for Good Occasions, whereas Dangerous Daddy’s confirmed improved profitability with decreased labor and occupancy prices. Plans for strategic closures of underperforming shops and enlargement within the Larger Charlotte market have been mentioned, alongside efforts to reinforce digital engagement and operational effectivity.
Key Takeaways
Good Occasions Eating places Inc. reported a 6.5% income improve to $37.9 million in Q3.Similar-store gross sales grew by 5.8% for Good Occasions and 1.2% for Dangerous Daddy’s.Dangerous Daddy’s labor prices decreased, whereas Good Occasions’ labor prices elevated.The corporate is contemplating closing one or two underperforming shops.A brand new location is anticipated to open within the Larger Charlotte DMA between late fiscal Q2 and early fiscal Q3 of 2025.Good Occasions accomplished the acquisition and rework of Colorado eating places and is enhancing digital engagement.The corporate repurchased shares, citing the market undervaluation of their enterprise.
Firm Outlook
Good Occasions Eating places is within the last negotiation levels for a lease within the Larger Charlotte DMA, with the opening projected for late fiscal Q2 or early fiscal Q3 of 2025.The corporate has plans to open one new location each 12 months, with a finances for remodels.Initiatives are underway to enhance each visitor and worker engagement.
Bearish Highlights
The corporate is going through elevated labor prices, requiring larger wages to draw expert staff.Meals and packaging prices for Good Occasions elevated by 20 foundation factors to 30.5%.Good Occasions’ restaurant-level working revenue decreased by $0.1 million to $1.7 million or 16.5% of gross sales.
Bullish Highlights
Good Occasions noticed a strong same-store gross sales development of 5.8%.Dangerous Daddy’s launched a preferred limited-time supply of smashed patty burgers.Dangerous Daddy’s restaurant gross sales elevated by $1.2 million to $27.3 million.Total restaurant-level working revenue for Dangerous Daddy’s was $3.9 million or 14.3% of gross sales.
Misses
Good Occasions’ occupancy prices elevated by 30 foundation factors to eight.2%.Different working prices for Good Occasions elevated by 60 foundation factors to 12%.
Q&A Highlights
The corporate is addressing the problem of labor prices and is targeted on gross sales restoration within the Atlanta market.Share repurchases have been made beneath the assumption that the market undervalues the corporate.Good Occasions is contemplating closures of 1 or two low-performing shops to enhance profitability.The corporate has different letters of intent in markets they’re exploring for enlargement.
Good Occasions Eating places Inc. is navigating a aggressive panorama with strategic development plans and operational enhancements. Whereas labor prices current a problem, the corporate is taking steps to optimize its portfolio and make investments sooner or later, signaling cautious optimism for the approaching fiscal intervals.
InvestingPro Insights
Good Occasions Eating places Inc. (GTIM) has been making notable strides in its operational efficiency, as mirrored in its third-quarter fiscal 2024 outcomes. To additional perceive the corporate’s monetary well being and funding potential, we flip to insights from InvestingPro.
InvestingPro Knowledge signifies a market capitalization of $28.11 million, suggesting a comparatively small participant within the restaurant trade, which might be poised for development or acquisition. The P/E ratio stands at 44.82, which is excessive in comparison with trade averages, indicating that buyers could also be anticipating larger earnings development sooner or later. Nevertheless, when adjusted for the final twelve months as of Q2 2024, the P/E ratio drops to a extra cheap 19.9. This adjustment may mirror extra precisely the corporate’s incomes potential after accounting for latest operational enhancements or market circumstances.
An essential metric to think about is the corporate’s income development, which for the final twelve months as of Q2 2024 was barely adverse at -0.97%, however confirmed a optimistic quarterly uptick of 1.88%. This implies that whereas the corporate could also be going through challenges in growing its income 12 months over 12 months, it’s managing to seek out development alternatives on a quarterly foundation.
InvestingPro Ideas spotlight that administration has been aggressively shopping for again shares, which aligns with the corporate’s report of share repurchases within the article. This might be an indication of administration’s confidence in the way forward for the corporate and a doubtlessly optimistic indicator for buyers. Moreover, with a excessive shareholder yield, buyers are prone to profit from each dividend funds and share worth appreciation, though it is famous that GTIM doesn’t pay a dividend to shareholders, which suggests the yield comes from different types of shareholder returns.
For readers concerned with a deeper dive into Good Occasions Eating places Inc.’s monetary well being and funding outlook, InvestingPro gives further tips about their platform. As of now, there are 6 extra suggestions accessible for GTIM at https://www.investing.com/professional/GTIM, which may present invaluable insights for potential buyers or present shareholders trying to make knowledgeable selections.
Full transcript – Good Occasions Restau (GTIM) Q3 2024:
Keri August: Good afternoon, girls and gents and welcome to the Good Occasions Eating places Inc. Fiscal 2024 Third Quarter Earnings Name. I’m Keri August, the corporate’s Senior Vice President of Finance and Accounting. By now everybody ought to have entry to the corporate’s earnings launch, which is offered within the Investor part of the corporate’s web site. As a reminder, part of right this moment’s dialogue will embody forward-looking statements inside the which means of federal securities legal guidelines. These forward-looking statements are usually not ensures of future efficiency and due to this fact you shouldn’t put undue reliance on them. These statements contain recognized and unknown dangers, which can trigger the corporate’s precise outcomes to vary materially from outcomes expressed or implied by the forward-looking statements. Such dangers and uncertainties embody, amongst different issues, the market worth of the corporate’s inventory prevailing from time-to-time, the character of different funding alternatives offered to the corporate, the disruption to our enterprise from pandemics and different public well being emergencies, the impression and period of staffing constraints at our eating places, the impression of provide chain constraints and inflation, the unsure nature of present restaurant improvement plans and the flexibility to implement these plans and combine new eating places, delays in growing and opening new eating places due to climate, native allowing or different causes, elevated competitors, price will increase or shortages in uncooked meals merchandise, different normal financial and working circumstances, dangers related to our share repurchase program, dangers related to the acquisition of further eating places, the adequacy of money flows and the fee and availability of capital or credit score facility borrowings to supply liquidity, modifications in federal, state or native legal guidelines and laws affecting the operation of our eating places, together with minimal wage and tip credit score laws and different issues mentioned beneath the Threat Elements part of Good Occasions Annual Report on Type 10-Okay for the fiscal 12 months ended September 26, 2023, and different reviews filed with the SEC. Throughout right this moment’s name, the corporate will talk about non-GAAP measures, which we consider will be helpful in evaluating our efficiency. The presentation of this extra info shouldn’t be thought-about in isolation or as an alternative to outcomes ready in accordance with GAAP and reconciliations to comparable GAAP measures accessible in our earnings launch. And now I wish to flip the decision over to our Chief Govt Officer, Ryan Zink.
Ryan Zink: Thanks, Keri and thanks all for becoming a member of us right this moment. I am inspired by the gross sales outcomes from each manufacturers, with Good Occasions delivering same-store gross sales development of 5.8% for the quarter. In the meantime, Dangerous Daddy’s reported a same-store gross sales improve this quarter, posting a 1.2% improve. Our strategy at each manufacturers is centered round an intense give attention to the friends and specifically at Dangerous Daddy’s, investing in larger entrance of home labor to supply higher hospitality in our eating rooms and larger engagement and velocity on the bar. As of the date of this name, same-store gross sales through the fourth quarter at Dangerous Daddy’s continued to be rising within the low single-digit vary and our efficiency towards the Black Field informal eating index has continued to development favorably. Smashed patty burgers have been a development this quarter and Dangerous Daddy’s nailed this development, releasing its personal smashed burgers as a restricted time supply for the summer season season. Our basic smash is a well-known construct with shredded lettuce, our home made kickback sauce, sliced onions and American cheese with a single quarter pound aggressively smashed patty. Our steakhouse smashed burger options the identical patty with home made grilled onion aioli, shredded lettuce, A1 onion rings, and sharp cheddar cheese. Each burgers show our culinary prowess, however at a major worth to our friends, with a worth level beginning at $8.50 for a single patty basic smash. We anticipate the basic smash to proceed into the autumn. As our friends have demonstrated their pleasure over this methodology of cooking a burger, we additional anticipate each the basic smash and the steakhouse smash to finally turn out to be everlasting objects on the complete menu. The gross sales stabilization within the Atlanta market that I discussed final quarter has continued, and though particular person retailer efficiency has diversified, I might now contemplate this a gross sales restoration within the markets. Our restaurant operations have improved from the place they have been 12 months in the past, and whereas our ardour for excellence implies that we now have extra work to do, I consider that we now have considerably improved our visitor expertise on this market. Labor continues to be an ongoing problem. In most markets the variety of candidates has elevated and the expertise and expertise of candidates for each workforce member and administration roles has improved considerably. Nevertheless, wage and wage pressures are usually not abating, attracting the workers who show the appropriate expertise, the appropriate give attention to the visitor, and the sturdy work ethic that is required at a Dangerous Daddy’s has required larger beginning wages or salaries than ever earlier than. Common pay for restaurant workers and administration continues to extend regardless of the larger slack that is been reported to exist within the total labor market. Given the persevering with challenges within the labor market and regardless of the rising tide of broad based mostly gross sales restoration, we now have just a few eating places in our portfolio that frequently and perpetually underperform on the highest line. As we proceed to judge the underlying actual property and every restaurant’s historic gross sales efficiency, together with pre-pandemic gross sales peaks, we might select to make the troublesome resolution to shut sure eating places that haven’t participated within the gross sales restoration that our total system has skilled. Our Madison, Alabama restaurant continues to carry out nicely and I am excited concerning the continuity of the extremely succesful administration workforce that we now have in that restaurant. It continues to be a prime quartile retailer by way of total gross sales efficiency. And as we strategy the one 12 months anniversary of that restaurant’s opening, the honeymoon impression we now have seen has been almost the tamest of any Dangerous Daddy’s opening because the authentic three in Charlotte over a decade in the past. I stay optimistic that when the restaurant enters the comp base following its 18 months of operations subsequent spring that it’s going to accomplish that rising gross sales on an already sturdy gross sales base. At Good Occasions, our gross sales development has been considerably weighted to dinner and late evening gross sales. Moreover, our gross sales development has been supported by sturdy gross sales tendencies on the two eating places we bought late in fiscal 2023, in addition to by eating places which have been reworked. Early into the fourth quarter, our rivals have elevated their promotional exercise with the prevalence of $5 worth meals. This has lower into our same-store gross sales efficiency a bit, and whereas we have historically shied away from deep reductions, we’re extremely attuned to the working setting and anticipate some further worth oriented promotional exercise, however with out partaking within the deep discounting that a lot of our rivals are. We closed on the acquisition of the Good Occasions in Parker, Colorado through the quarter. This restaurant has a eating room and has a bigger footprint than most of our Good Occasions, that are usually double drive-through codecs. This restaurant was moderately nicely maintained with new gear and an inside that was already clear and in good situation, however after 20 years of operations, some TLC was due. We instantly changed the awnings, painted the constructing, utterly refurbished the parking zone and carried out a panorama overhaul. We have added digital menu boards and have our new signal package deal in flight. We’re excited concerning the gross sales potential at this restaurant in a suburb of Denver that’s experiencing sturdy inhabitants development. We additionally accomplished the rework of a Good Occasions in Lakewood, Colorado and have skilled a major turnaround in gross sales at this restaurant. Pre-remodel gross sales have been optimistic or have been trending double-digit adverse and are actually usually trending double-digit optimistic on a year-over-year foundation. This extra intensive rework required a six-week closure and extra substantial CapEx than we have usually been spending on our remodels. That is the fourth rework of our conventional double drive-through items. Digital engagement stays a spotlight for us, and as we mentioned final quarter, the challenges concerned in visitor adoption of a brand new loyalty program in a primarily drive-through idea are manifesting slower than desired development in member exercise. That mentioned, development in member exercise has once more accelerated after a lull close to the tip of Q2, and we have created some workforce member and administration incentives to make sure the appropriate focus on the restaurant degree on rising GT Rewards. We’re close to the tip of our rollout of our subsequent technology point-of-sale system, Toast, which is the main, most function wealthy, cloud centric point-of-sale system. We have seen important enchancment so as taking and cost processing with this new system, which has supplied larger time for order takers and cashiers to give attention to value-added interactions with our friends, together with highlighting GT Rewards. We’re conducting an analogous analysis of Dangerous Daddy’s and it’s seemingly {that a} take a look at and doable rollout of the Toast system will likely be forthcoming throughout our subsequent fiscal 12 months. We repurchased 92,240 shares through the quarter beneath our share repurchase program. Moreover, we executed a privately negotiated buy of roughly 171,000 shares at a mean worth of $2.60 per share. We proceed to consider that the market is just not adequately valuing our enterprise and that the share repurchase program generates a powerful return for shareholders who select to carry their shares. On the finish of the quarter, we had roughly one half million {dollars} remaining on the repurchase authorization. At present charge of repurchases and present market worth, we nonetheless have just a few months left on the prevailing authorization and assuming market components stay related, we anticipate the authorization to be expanded someday previous to the exhaustion of the present authorization. With that, I’ll now flip the decision again over to Keri to assessment our efficiency for the quarter.
Keri August: Thanks, Ryan. Let’s assessment this quarter’s outcomes. Complete revenues elevated roughly 6.5% for the quarter to $37.9 million. Complete restaurant gross sales for Dangerous Daddy’s eating places elevated $1.2 million to $27.3 million for the quarter. The gross sales improve was a results of the fourth quarter 2023 Madison, Alabama Restaurant opening, the prior 12 months rework momentary closure of the Greenville, South Carolina restaurant, in addition to an approximate 4.4% menu worth improve, partially offset by diminished buyer site visitors. Similar-store gross sales elevated 1.2% for the quarter, with 39 Dangerous Daddy’s within the comp base at quarter finish. Value of gross sales at Dangerous Daddy’s have been 31.2% for the quarter, a ten foundation level improve from final 12 months’s quarter. The rise is primarily attributable to larger buy costs in our commodity basket in comparison with the prior 12 months quarter, partially offset by the impression of a 4.4% common improve in menu pricing. In the course of the present quarter we started to expertise elevated prices throughout the assorted proteins in our basket. Particularly wholesale floor beef costs have elevated and following the tip of the quarter elevated to an all-time file, and we anticipate them to proceed to stay elevated through the fourth fiscal quarter of 2024 as will seemingly be the case for different proteins and meals based mostly commodities, Dangerous Daddy’s labor prices decreased by 90 foundation factors in comparison with the prior 12 months quarter to 33.8% for the quarter. This lower as a share of gross sales is attributable to larger labor productiveness. Occupancy prices at Dangerous Daddy’s decreased 20 foundation factors to six.3%. Dangerous Daddy’s different working prices have been flat in comparison with the prior 12 months quarter at 14.4% for the quarter. Total restaurant degree working revenue, a non-GAAP measure for Dangerous Daddy’s, was roughly $3.9 million for the quarter or 14.3% of gross sales in comparison with $3.5 million or 13.3% final 12 months. Complete restaurant gross sales for firm owned Good Occasions Eating places elevated roughly $1.1 million to $10.4 million for the quarter in comparison with the prior 12 months third quarter. The typical menu worth improve for the quarter was roughly 3.9% over the identical prior 12 months quarter. Similar-store gross sales elevated 5.8% for the quarter, with 26 Good Occasions Eating places within the comp base at quarter finish. Meals and packaging prices for Good Occasions have been 30.5% for the quarter, a rise of 20 foundation factors in comparison with final 12 months’s quarter. The rise is primarily attributable to larger buy costs on meals and paper items, partially offset by the impression of three.9% common improve in menu pricing. As within the case with Dangerous Daddy’s, we anticipate continued stress on beef and different meals costs within the final quarter of the fiscal 12 months. Complete labor price for good instances elevated to 32.7%, a 160 foundation level improve from the 31.1% we ran throughout final 12 months’s quarter. As a result of labor related to three further firm owned eating places, a rise in working hours brought on by later closing instances in almost each restaurant, and better common wage charges ensuing from market forces and the CPI listed minimal wage in Denver and the State of Colorado. Occupancy prices at Good Occasions have been 8.2%, a rise of 30 foundation factors from the prior 12 months quarter. The rise is primarily as a result of prices incurred for 3 further firm owned eating places in addition to actual property tax will increase ensuing from larger property values. Good Occasions different working prices have been 12% for the quarter, a rise of 60 foundation factors, primarily as a result of prices related to three further firm owned eating places, in addition to elevated restore and upkeep, bank card charges, and buyer supply charges. Good Occasions Eating places degree working revenue decreased by $0.1 million for the quarter to $1.7 million. As a p.c of gross sales restaurant degree working revenue decreased by 280 foundation factors versus final 12 months to 16.5%. Mixed normal and administrative bills have been $2.7 million through the quarter or 7.1% of complete revenues, a rise of 40 foundation factors from the prior 12 months quarter. Our internet earnings to widespread shareholders for the quarter was $1.3 million or earnings of $0.12 per share versus internet earnings of $0.8 million, $0.07 per share within the third quarter final 12 months. There was roughly $0.2 million of earnings tax profit recorded through the present quarter versus $0.6 million within the prior 12 months quarter. Adjusted EBITDA for the quarter was $2.1 million in comparison with $2.1 million for the third quarter of 2023. We completed the quarter with $4.8 million in money and $1.1 million of long-term debt. And now I’ll flip the decision again to Ryan.
Ryan Zink: Thanks, Keri. Our operator’s identify can be Kerry and so presently we’ll flip our name again over to our operator, Kerry for questions presently.
Operator: Thanks. [Operator Instructions] Your first query will come from Roger Lipton [ph].
Unidentified Analyst: Sure. Good afternoon, guys. A query with the rising beef costs, possibly you made a rapid touch upon it, however so I missed it. Do you anticipate to have to boost menu costs to offset the upper beef costs at each ideas?
Ryan Zink: Sure Roger thanks for dialing in. Thanks for the query. We consider costs in numerous lenses and a type of is actually what the competitor setting is doing and there is definitely a buyer demand for worth proper now and so we actually must handle to sure prices and to handle our prices. However I feel simply because we now have beef costs in the meanwhile which are excessive, I might not essentially say, oh that is going to be a This autumn worth improve. Now what I might say is that particularly because the 12 months rolls over, the calendar 12 months rolls over, the labor prices will seemingly improve once more. And so proper now, in the meanwhile I might say for each ideas we’re actually concentrating on the tip of fiscal quarter one for our subsequent worth improve, though the setting is dynamic and so we’ll stay dynamic and make and alter as we see. I may also say Roger, that based mostly on the commodity reviews that we get, the long-term prognosis for beef of all kinds, not simply floor beef is considerably adverse from a value standpoint. In different phrases, continued elevation of price within the long-term. And so that is in all probability a difficulty that the whole phase goes to must cope with for somewhat little bit of time.
Unidentified Analyst: Proper. Did you point out your promoting expense within the quarter? In all probability you probably did and I missed it.
Ryan Zink: Keri, do you have got at your disposal the promoting expense for the quarter?
Keri August: I do. We had 700, what’s that, Ryan?
Ryan Zink: Go forward, Keri.
Keri August: Okay. Promoting expense was 2% of revenues for the quarter, $749,000.
Unidentified Analyst: Okay. And do you anticipate that to stay roughly the identical order of magnitude for This autumn?
Ryan Zink: So, Roger, I might say for This autumn that is in all probability the case. Q1 is at all times somewhat little bit of an elevated quantity as a result of we do quite a lot of present playing cards by giant field retailers and so Q1 tends to have outsized promoting expense with the opposite quarters usually being related in nature to one another. And so, sure for This autumn I might say in all probability 2% give or take is an efficient estimate.
Unidentified Analyst: Okay. And lastly, your finest guess by way of retailer degree margins on this present quarter, how do you suppose they’re going to look or what’s your finest guesses? The way it would possibly look in comparison with the quarter simply ended thirteenth, the 14th [indiscernible]?
Ryan Zink: Sure, actually. Seasonally, this Q3 tends to be, from a gross sales standpoint, the best quantity quarter of the fiscal 12 months. And so I feel simply by way of some gross sales deleverage that is a results of seasonality, we’ll see somewhat little bit of compression. I anticipate, usually talking, that the margin development year-over-year will likely be much like what we noticed this quarter.
Unidentified Analyst: The margin development being, how do you, may you?
Ryan Zink: Effectively, so let me, I feel from a value of gross sales standpoint, we’ll see somewhat little bit of elevation in price of gross sales. I feel labor will likely be somewhat bit elevated, however the different prices will likely be fairly related. Obtained it.
Unidentified Analyst: Obtained it. Okay, good. All proper, good luck. You are doing, making some good progress, so good to see, in order that’s all I’ve received for now. Thanks.
Ryan Zink: Thanks once more, Roger.
Operator: [Operator Instructions] There aren’t any additional questions presently. You do have a query from Mark Schuller [ph].
Unidentified Analyst: Hello, Ryan. Nice quarter. Only a fast, are you able to simply give us an replace on the place issues stand with issues which are within the improvement pipeline proper now?
Ryan Zink: Certain. So we’re on the last levels of negotiating a lease within the Larger Charlotte DMA. And whereas issues can at all times disintegrate, and I will caveat it with that, we do have one lease that is very, very shut. We’d anticipate that, that if we’re capable of get that throughout the end line, we might be capable of open that in all probability late fiscal Q2 of 2025, presumably early fiscal Q3. So I might say within the late March-April timeline of subsequent 12 months. After which we now have another, LOIs in markets that we’re . I might say our present cadence is mostly one each 12 months roughly, possibly a second one. That mentioned, we now have sufficient CapEx allotted in direction of our remodels at Good Occasions that we predict is admittedly essential to reinvest in our present eating places. And our normal strategy round conservatism with respect to debt that we predict one over the subsequent 12 months will likely be enough.
Unidentified Analyst: Okay. Thanks. After which simply type of a followup in your mentioning the opportunity of some closures. I imply, are we speaking a pair or are we speaking greater than that type of factor that you simply’re doubtlessly ?
Ryan Zink: I feel we’re speaking very low single digits and I feel there’s not likely something there by way of like, oh that is that we’ll shut huge quantities of shops, however fairly simply to type of alert our buyers, hey we could also be closing one or two, and that is not a sign of something dangerous. It is simply a sign of good and well timed actual property administration.
Unidentified Analyst: Okay. I recognize it. Nice quarter.
Ryan Zink: Sure, thanks once more.
Operator: Your last query will come from David Schwartz [Morningstar].
David Schwartz: Sure, thanks for taking my query. So following up on the final query and in your feedback earlier, are a few of the lowest performing shops at present unprofitable on a 4 wall foundation, which means have they been really detracting from profitability?
Ryan Zink: Sure, the shop two that we’re contemplating closing are adverse restaurant, what we might name internally restaurant degree money move what I feel we might say within the funding neighborhood is restaurant degree working revenue. So for these particular person shops, they’re adverse contributors. And finally, whereas a few them might have somewhat little bit of life left on the lease, the purpose could be that finally closing these turn out to be earnings accretive.
David Schwartz: Okay, thanks once more and thanks for all the data on right this moment’s name.
Ryan Zink: Thanks David.
Operator: There aren’t any additional questions presently. I will go forward and switch the decision again over to Ryan.
Ryan Zink: I’m very optimistic concerning the future for each manufacturers. Now we have thrilling initiatives that can translate into each visitor and worker engagement at each ideas. Their sturdy working momentum is promising. These enhancements are pushed by our workforce members, managers and leaders all through our firm, whose give attention to hospitality, customer support and delight of their work and in our ideas is clear each shift of on daily basis. I need to once more thanks all for becoming a member of us right this moment.
Operator: Thanks in your participation. This does conclude right this moment’s convention. Chances are you’ll now disconnect.
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