Red Robin Gourmet Burgers, Inc. — Q1 2024 Form 10-Q
Reporting period: 16 weeks ended April 21, 2024; comparison is the 16 weeks ended April 16, 2023. Red Robin operated 413 company-owned and 92 franchised restaurants. Unless otherwise noted, amounts are in millions.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $388.5 | $417.8 | Down 7.0% |
| Restaurant revenue | $378.6 | $406.9 | Down 7.0% |
| Operating income (loss) | $(2.1) | $4.2 | Declined $6.3 |
| Net loss | $(9.5) | $(3.3) | Loss increased $6.2 |
| Diluted loss per share | $(0.61) | $(0.20) | |
| Adjusted EBITDA (non-GAAP) | $12.2 | $35.9 | Down $23.7 |
| Operating cash flow | $13.7 | $17.3 | Down $3.6 |
Comparable restaurant revenue fell 6.5% across 406 comparable company-owned restaurants. Guest count declined 9.4%, partly offset by a 2.9% increase in average check. Management cited the prior-year performance comparison, the exit from virtual brands, and adverse weather as factors affecting traffic.
Restaurant-level operating profit, a non-GAAP measure, was $41.5 million, or 11.0% of restaurant revenue, versus $60.0 million and 14.7% a year earlier. Cost of sales improved to 23.8% of restaurant revenue from 24.5%; labor rose to 39.3% from 35.7%, and occupancy rose to 8.3% from 7.3%. Management attributed labor pressure to wage and staffing investments, a new partner bonus plan, and higher insurance costs. Occupancy was affected by sale-leaseback-related rent, acquired restaurants, and lower sales.
Balance sheet, debt, and liquidity
- Cash and cash equivalents were $30.6 million; restricted cash was $8.0 million. Together, cash and restricted cash were $38.6 million, up $7.0 million from year-end.
- Management reported approximately $55.6 million of liquidity, including $25.0 million of available revolver capacity. The company said operating cash flow and remaining borrowing capacity should cover working-capital needs and planned capital expenditures.
- Term-loan principal was $167.9 million, at a variable rate of 11.59% at quarter-end; balance-sheet long-term debt, net of discounts and issuance costs, was $162.0 million. The company repaid $21.2 million of term debt during the quarter. It reported compliance with debt covenants.
- Current assets of $93.3 million were below current liabilities of $197.6 million. Stockholders’ deficit was $29.1 million. Management noted that the business typically operates with a working-capital deficit.
- Capital expenditures were $8.2 million, compared with $16.1 million in the prior-year quarter. Financing cash outflow was $21.9 million, principally reflecting term-loan repayment.
Material changes, unusual items, and outlook
- The company sold ten restaurant properties in a sale-leaseback for $23.9 million gross proceeds and $23.4 million net proceeds, recognizing a $7.4 million net gain. Sale-leaseback gains reduced reported expenses; sale-leaseback-related rent contributed to higher occupancy costs.
- Other charges (gains), net were a $4.0 million gain in Q1 2024, compared with $9.8 million in charges in Q1 2023. Q1 2024 included severance and executive-transition costs, litigation contingencies, closure costs, and asset-disposal costs, partly offset by the sale-leaseback gain.
- Management provided no specific numeric earnings or revenue guidance in the supplied filing text. It described ongoing strategic and restaurant-improvement initiatives and said future operating cash flow plus available borrowing capacity should support working capital and planned capital expenditures.
- Risks highlighted include guest traffic and consumer preferences, labor and commodity costs, interest-rate exposure, weather and other disruptions, competition, and litigation. A 1% change in the effective rate on variable-rate borrowings would change annualized pretax interest expense by about $1.7 million; a 1% increase in food and beverage costs would increase annualized cost of sales by about $2.9 million.
- Loss-contingency reserves were $9.2 million. The company also disclosed $215.6 million of non-cancellable purchase commitments, primarily for food, beverages, and supplies, expected to be fulfilled in the ordinary course. Management said litigation outcomes could differ from current estimates.
- The comparative 2023 statements were corrected for an immaterial gift-card breakage accounting error: reported prior-year revenue and net income were each reduced by $0.156 million, and diluted loss per share changed from $(0.19) to $(0.20).
Important facts for investors to verify
- Whether traffic and comparable sales stabilize, given the 9.4% guest-count decline and lower restaurant-level margin.
- Whether labor, occupancy, and marketing costs can be managed as sales change.
- Debt repayment capacity and exposure to variable interest rates; confirm borrowing availability and covenant compliance in later filings.
- The recurring operating impact of sale-leasebacks, including added rent, versus the one-time gain and debt reduction.
- Potential changes in litigation reserves, purchase commitments, and other cash requirements.
- How management’s strategic initiatives and restaurant investments affect results; no specific numeric guidance was provided here.