GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)--Aug 21, 2018--Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB), a full-service restaurant chain serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, today reported financial results for the quarter ended July 15, 2018.

Second Quarter 2018 Financial Highlights Compared to Second Quarter 2017

Total revenues were $315.4 million, a decrease of 0.6%; Off-premise sales increased 260 basis points to 9.6% of total food and beverage sales; Comparable restaurant revenue decreased 2.6% (using constant currency rates); Comparable restaurant guest counts decreased 0.7%; Restaurant labor costs as a percentage of restaurant revenue improved 40 basis points to 34.3%; GAAP (loss)/earnings per diluted share were $(0.14) compared to $0.53; and Adjusted earnings per diluted share were $0.46 compared to $0.61 (see Schedule I).

“As stated in our pre-release, we were disappointed with our second quarter topline sales and declines in dine-in traffic,” said Denny Marie Post, Red Robin Gourmet Burgers, Inc. chief executive officer. “We did not execute as well as we know we are capable of, particularly at critical peak demand hours when we must be prepared to serve dine-in Guests and our rapidly growing off premise demand. We are moving urgently to improve service execution with renewed and narrowed focus on fundamentals while we continue to differentiate Red Robin as affordable everyday with more burger options and stronger value tactics. We are also adding resources to drive sales of our unique and well-received Burger Bar catering program. We expect all of these elements to be in place early in Q4.”

Operating Results

Total revenues, which primarily include Company-owned restaurant revenue and franchise royalties, decreased 0.6% to $315.4 million in the second quarter of 2018 from $317.3 million in the second quarter of 2017. Restaurant revenue decreased $2.0 million due to a $7.9 million, or 2.6%, decrease in comparable restaurant revenue and a $1.0 million decrease from closed restaurants, partially offset by a $6.6 million increase in revenue from new restaurant openings and a $0.3 million favorable foreign currency exchange impact.

System-wide restaurant revenue (which includes franchised units) for the second quarter of 2018 totaled $374.7 million, compared to $375.9 million for the second quarter of 2017.

Comparable restaurant revenue (1) decreased 2.6% in the second quarter of 2018 compared to the same period a year ago, driven by a 1.9% decrease in average guest check and a 0.7% decrease in guest counts. The decrease in average guest check comprised a 2.4% decrease in menu mix, offset by a 0.5% increase in pricing. The Company’s comparable revenue growth is calculated by comparing the same calendar weeks which, for the second quarter of 2017, exclude the first week of the second quarter of 2017 and include the first week of the third quarter of 2017.

Net loss was $1.9 million for the second quarter of 2018 compared to $6.9 million net income for the same period a year ago. Adjusted net income was $6.0 million for the second quarter of 2018 (see Schedule I).

Restaurant-level operating profit margin (a non-GAAP financial measure) was 19.3% in the second quarter of 2018 compared to 20.8% in the same period a year ago. The 150 basis point decrease in the second quarter of 2018 resulted from a 40 basis point increase in cost of sales, a 50 basis point increase in occupancy costs, and a 90 basis point increase in other restaurant operating expenses, offset by a 40 basis point decrease in labor costs. Schedule II of this earnings release defines restaurant-level operating profit, discusses why it is a useful metric for investors, and reconciles this metric to income from operations and net income, in each case under GAAP.

Other Results

Depreciation and amortization costs increased to $22.3 million in the second quarter of 2018 from $21.2 million in the second quarter of 2017. The increased depreciation was primarily related to new restaurant technology implemented beginning in third quarter 2017 and new restaurants opened since the second quarter of 2017.

General and administrative costs were $20.4 million, or 6.5% of total revenues, in the second quarter of 2018, compared to $21.9 million, or 6.9% of total revenues in the same period a year ago. The decrease was primarily due to decreases in salaries and team member benefits related to the reorganization in the first quarter 2018 and lower corporate marketing costs.

Selling expenses were $15.2 million, or 4.8% of total revenues, in the second quarter of 2018, compared to $14.4 million, or 4.5% of total revenues, during the same period in the prior year. The increase was primarily due to an increase in national media spend.

Pre-opening costs were $0.6 million in the second quarter of 2018, compared to $1.4 million in the same period a year ago. The decrease was primarily due to the number of restaurant openings.

Other charges in the second quarter of 2018 included asset impairment of $9.6 million, disposal of spiral menus of $0.5 million, and $0.5 million reorganization costs.

The Company’s effective tax rate in the second quarter of 2018 was 71.6% benefit, compared to an effective tax rate of 0.3% benefit in the second quarter of 2017. The change in the effective tax rate is primarily due to the decrease in income, as well as the decrease in the federal statutory rate from 35% to 21% that occurred in the first quarter of 2018.

Loss per diluted share for the second quarter of 2018 was $0.14 compared to diluted earnings per share of $0.53 in second quarter of 2017. Excluding charges of $0.54 for asset impairment, $0.03 for spiral menu disposal, and $0.03 per diluted share for reorganization costs, adjusted earnings per diluted share for the second quarter ended July 15, 2018 were $0.46. See Schedule I for a reconciliation of adjusted net income and adjusted earnings per share (each, a non-GAAP financial measure) to net income and earnings per share.

Restaurant Development

During the second quarter of 2018, the Company opened two Red Robin restaurants and our franchisees opened one Red Robin restaurant. The Company plans to open two Red Robin restaurants and our franchisees plan to open two Red Robin restaurants during the remainder of 2018.

The following table details restaurant unit data for Company-owned and franchised locations for the periods indicated:

Balance Sheet and Liquidity

As of July 15, 2018, the Company had cash and cash equivalents of $21.9 million and total debt of $221.4 million, excluding $10.6 million of capital lease liabilities. The Company funded construction of new restaurants and other capital expenditures with cash flow from operations and made net repayments of $10.0 million on its credit facility during the second quarter of 2018. As of July 15, 2018, the Company had outstanding borrowings under its credit facility of $220.5 million, in addition to amounts issued under letters of credit of $7.5 million, which reduce the amount available under its credit facility but are not recorded as debt.

The Company’s lease adjusted leverage ratio was 3.94x as of July 15, 2018. The lease adjusted leverage ratio is defined in Section 1.1 of the Company’s credit facility, which is filed as Exhibit 10.32 in the Annual Report on Form 10-K filed on February 21, 2017.

The Company’s board of directors recently authorized an increase to the Company’s share repurchase program of approximately $21 million to a total of $75 million of the Company’s common stock. The share repurchase authorization will terminate upon completing repurchases of $75 million of common stock unless otherwise terminated by the board. Pursuant to the repurchase program, purchases may be made from time to time at the Company’s discretion and the Company is not obligated to acquire any particular amount of common stock.

Outlook for 2018

Total revenues is projected to range from $1.350 billion to $1.365 billion for full-year 2018. Comparable restaurant revenue is projected to decrease 1.0% to 2.0% for full-year 2018. The Company expects comparable restaurant revenue to be in the lower end of this range in the third quarter of 2018. Earnings per diluted share is projected to range from $1.80 to $2.20 for full-year 2018.

Guidance Policy

The Company provides guidance as it relates to selected information related to the Company’s financial and operating performance, and such measures may differ from year to year.

Investor Conference Call and Webcast

Red Robin will host an investor conference call to discuss its second quarter 2018 results today at 5:00 p.m. ET. The conference call number is (888) 254-3590, or for international callers (323) 994-2093. The financial information that the Company intends to discuss during the conference call is included in this press release and will be available in the “Company” section of the Company’s website at www.redrobin.com by selecting the “Investor Relations” link, then the “Calendar of Events” link. Prior to the conference call, the Company will post supplemental financial information that will be discussed during the call and live webcast.

To access the supplemental financial information and webcast, please visit www.redrobin.com and select the “Company” section, then the “Investor Relations” link, then the “Presentations” link. A replay of the live conference call will be available from two hours after the call until midnight on Tuesday, August 28, 2018. The replay can be accessed by dialing (844) 512-2921, or (412) 317-6671 for international callers. The conference ID is 2893335.

About Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB)

Red Robin Gourmet Burgers, Inc. ( www.redrobin.com ), a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc., and under the trade name Red Robin Gourmet Burgers and Brews, is the Gourmet Burger Authority ™, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries ®  in a fun environment welcoming to guests of all ages. Whether a family dining with kids, adults grabbing a drink at the bar, or teens enjoying a meal, Red Robin offers an unparalleled experience for its guests. In addition to its many burger offerings, Red Robin serves a wide variety of salads, soups, appetizers, entrees, desserts, and signature beverages. Red Robin offers a variety of options behind the bar, including its extensive selection of local and regional beers, and innovative adult beer shakes and cocktails, earning the restaurant a VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are more than 570 Red Robin restaurants across the United States and Canada, including locations operating under franchise agreements. Red Robin… YUMMM ®! Connect with Red Robin on Facebook, Instagram, and Twitter.

Forward-Looking Statements

Forward-looking statements in this press release regarding the Company’s future performance, restaurant sales and guest traffic, earnings per share, new unit development, implementation of technology, and statements under the heading “Outlook for 2018,” and all other statements that are not historical facts, are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on assumptions believed by the Company to be reasonable and speak only as of the date on which such statements are made. Without limiting the generality of the foregoing, words such as “expect,” “believe,” “anticipate,” “intend,” “plan,” “project,” “will” or “estimate,” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. Except as required by law, the Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date, and cautions investors not to place undue reliance on any such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements based on a number of factors, including but not limited to the following: the effectiveness of the Company’s strategic initiatives including the Company’s affordability initiatives to drive traffic and sales; the effectiveness of the Company’s marketing strategies and promotions to achieve restaurant sales growth; the cost and availability of key food products, labor, and energy; the ability to achieve anticipated revenue and cost savings from anticipated new technology systems and tools in the restaurants; the ability to develop, test, implement and increase online ordering, to-go services, catering, and other off-premise sales; the ability to increase labor productivity through alternative labor models, and to train our workforce for service execution complexities related to growth of multiple revenue streams in the restaurant; our ability to repurchase shares at all or at the times or in the amounts we currently anticipate or to achieve anticipated benefits of a share repurchase program; availability of capital or credit facility borrowings; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; the impact of federal, state, and local regulation of the Company’s business; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission.

This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20180821005670/en.