Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers Incorporated First Quarter 2023 Earnings Call. This conference is being recorded. During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore, are subject to risks and uncertainties as described in the company's SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with the generally accepted accounting principles, but are intended to illustrate an alternative measure of the company's operating performance that may be useful. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its first quarter 2023 earnings release on its website at ir.redrobin.com. Now I'd like to turn the call over to Red Robin's CEO, G.J. Hart.

Good afternoon, and thank you all for joining us today. With me is Todd Wilson, our Chief Financial Officer, who will review our first quarter results and discuss our upwardly revised 2023 financial guidance outlook among other items after I conclude my remarks. We are pleased with our performance to start 2023 and the traction we are seeing as we roll out our North Star plan. I want to thank our operators and restaurant and support center team members. You are doing a fantastic job. Your dedication and hard work drove our success in Q1 and will carry us into the future. Our strong results in the first quarter are a great first step on this journey. And we know this is a comeback that will take time to fully deliver. We are encouraged to see early proof points of success. First, guest satisfaction scores have now increased 5 percentage points as compared to 2022. We are seeing gains across the full portfolio with the greatest increase in our bottom quartile restaurants as we would expect. Second, guest wait times and false waits have declined substantially as we staff our restaurants properly. A year ago, more than 10% of our guests reported waiting more than 15 minutes to be seated. Now that's down to only 2% of our guests. Shorter wait times result in happier guests and reduced walkaways. Third, first quarter results exceeded the Black Box Casual Dining industry benchmark for both same-store sales and traffic. That beat increased as the quarter progressed. We attribute the speed to the benefits of capturing sales that we previously lost due to false waits and extended wait times. Red Robin has a 16-week first quarter which is unique compared to many of our peer restaurant companies, who more typically report a 13-week first quarter. As a point of comparison, based on our point-of-sale sales data, our comparable restaurant sales increased 10% in the first 13 weeks of the quarter. We also celebrated over 700 new sales records established in the first quarter. These are hourly, daily and weekly high watermarks per restaurant. In a brand that is nearly 50 years old, to set more than 700 new records is a testament to the incredible work of our restaurant teams and the overall direction of our company. Lastly, we printed a meaningful first step to restore restaurant-level profitability to historical levels and significant gains in adjusted EBITDA. As I initially shared in January, our blueprint for the comeback of this iconic brand is our Five-Point North Star Plan. The changes we are implementing are designed to cement our competitive positioning, drive sustainable growth and build long-term shareholder value. Now I will share updates on each pillar of the North Star plan. Number one, we are transforming to an operations-focused restaurant company. This change is well underway as we are involving our frontline operators in all key decisions. With the start of the second quarter, we launched our market partner program to all multiunit operators. This program changes the compensation structure for these partners to reward them based on the profits of the restaurants they oversee. By making this change, these leaders are incentivized and rewarded for driving and delivering results. We are learning from the rollout of this multiunit operator program and will incorporate this learning into our single-unit operator program, which we expect to launch with the start of 2024. Number two, elevating the guest experience. Our top two investment priorities related to the guest experience are: number one, staffing at hospitality levels; and number two, food quality enhancements and breadth of menu options. Our hospitality model changes and investments represent a return to an industry-standard staffing model and the staffing model Red Robin used for many years to generate great success. Key changes add back bussers, hosts, bartenders and expo roles that were eliminated or reduced in Red Robin's past and reverting back to our more traditional hospitality standard where servers have fewer tables and do not rely as heavily on server assistance. We made significant progress in the first quarter and are more than 50% complete with these additions. We expect to be substantially complete by the end of the second quarter. For our food and menu updates. On the side of every one of our restaurants, hangs a sign proclaiming Gourmet Burgers. The bar has been raised over the years on what it means to deliver a truly Gourmet Burger and we are upping the ante. The first step in upgrading our cooking platform from a legacy conveyor belt-driven system to a flat-top grill. Changing the cooking method alone delivers our guests a 20% larger, juicier and more flavorful burger. We tested the flat-top grills in the first quarter of the year and began the system-wide rollout in April. We have moved very quickly and have already installed flat-top grills in nearly 300 restaurants and expect to complete the system-wide implementation in the second quarter. Not only does this change provide great flavor, quality and value to our guests, team members are excited by this change, have a greater sense of pride in their work and report that it is easier to execute. Finally, we expect the flat-top grills will significantly reduce repair and maintenance costs, and cleaning costs as compared to our legacy system. The investments in the burger patty are a critical first step and we are not stopping there. In February, we welcomed Chef Brian Sullivan to lead our culinary efforts. He and the team have done fantastic work to identify and solve key upgrades to burger toppings and new menu options. Following completion of the flat-top installation, we will phase in upgrades to buns, bacon, mayonnaise, ripe tomatoes among other changes. We will also change our preparation procedure to deliver more delicious caramelized onions and salted mushrooms. Red Robin has historically presented its burgers wrapped in wax paper, which fit at the time the brand was developed. With an upgraded burger patty and the best and freshest ingredients we can source, we think the time has come to showcase the beauty and deliciousness of our truly Gourmet Burger. Later this year, we will move away from the wax paper wrapping to introduce new plateware, allowing each burger to stand tall on its own, next to the plentiful serving of our bottomless fries and other sides. Lastly, as it relates to the menu, we are in the final development stages for new entrees beyond our burger lineup with new non-fried appetizers that provide guests greater variety and enable a true barbell menu pricing strategy. We expect all these upgrades will be implemented across the system by October of this year. Number three, removing costs and complexity. In order to help support our guest-facing investments, we have been hard at work identifying areas where we can thoughtfully reduce or remove costs that do not impede the guest experience or detract from our commitment to quality. Our supply chain team has done a great job identifying and now capturing opportunities that provide our guests parity or better product at a reduced cost. In addition, many vendors have partnered with us to restructure contracts that provide more favorable rates and the opportunity for both sides to benefit as our business grows. Number four, optimizing guest engagement. As we move to an operator-focused company and strive to become the most loved brand in the communities that we serve, we are empowering our restaurants to engage with their communities directly. Red Robin was the original leader in local marketing, and we will drive to return this to our local marketing roots. We are fortunate to have an incredibly strong Red Robin Royalty loyalty program, now with 11.5 million members, up from 11.3 million members a quarter ago. We have begun the work to engage and evolve the program further by focusing on rewarding our most loyal guests rather than what was primarily a discount strategy in the past. Our new Chief Marketing Officer, Kevin Mayer, and the team have hit the ground running, and I will share more progress in the future. Number five, driving growth in comparable restaurant revenue and unit-level profitability to deliver on our financial commitments. Q1 results demonstrate what we can accomplish when we have the right strategy in place and execute accordingly, and we have only just begun. The credibility with the investment community is critical, and these first quarter results are a good start and a first step on this journey. We will continue to be diligent in our operational execution to drive sales and profit growth, and I am confident that when we provide financial commitments, we can deliver on them. Let me now turn the call over to Todd.

Thank you, G.J., and good afternoon, everyone. I will begin with a recap of our financial performance for the first quarter, which is a 16-week quarter, and then walk you through our upwardly revised financial guidance for 2023. Total revenues in Q1 were approximately $418 million, an increase of $22.4 million versus the first quarter of fiscal 2022. The increase in revenue resulted from an increase in comparable restaurant sales of 8.6%, the ninth consecutive quarter of positive comparable sales growth and an acceleration from the 2.5% growth we posted in the fourth quarter of 2022. Comparable restaurant traffic increased 0.6%. The balance of our comparable sales growth was due to menu price increases and favorable sales channel mix. Of note, dine-in sales increased 16% as compared to the first quarter of 2022. Dine-in sales represent 74% of restaurant sales in the first quarter. We believe these figures reflect a broad post-COVID normalization and a further proof point of the effectiveness of our North Star plan with guests seeking and enjoying the dine-in experience at Red Robin. Restaurant-level operating profit as a percentage of restaurant revenue was 14.7%, an increase of approximately 70 basis points compared to the first quarter of 2022 and a 330 basis point sequential increase from 11.4% in the fourth quarter of 2022. While we experienced cost inflation across many categories, we were able to grow restaurant-level operating profit margin through the growth in comparable restaurant revenue and the initial implementation of cost savings measures. Commodity inflation was approximately 8% in the first quarter of 2023 and moderated faster than expected from the 13% we experienced in the fourth quarter of 2022. We anticipate year-over-year inflation will continue to sequentially step down through the balance of the year. In labor expenses, hourly wage inflation was approximately 6%. We also invested approximately $3 million in the quarter to add staffing in the operational roles G.J. mentioned earlier. Additionally, incentive compensation expense for our restaurant management teams increased over $1 million versus the first quarter of 2022 due to the significant gains in sales and profit performance the restaurant teams produced. While these are added costs, we see real evidence of the benefits of these investments in guest satisfaction, sales and profit results. Even with these investments, total labor costs declined 60 basis points as compared to the first quarter of 2022, led by leverage from the sales gains. In other operating expenses, we experienced lower third-party sales commissions resulting from lower third-party sales mix, which was generally offset by higher repair and maintenance costs. General and administrative costs were $26.8 million, an increase versus the prior year of approximately $2.5 million. The increase is led by accrual of higher incentive compensation expenses and legal and professional fees associated with the sale leaseback and franchise acquisition transactions, partially offset by reductions in staffing levels. Selling expenses were $7.7 million, a decrease versus the prior year of approximately $2.2 million, led by reductions in print, agency and website spending. Adjusted EBITDA was $36.1 million compared to $28 million in the first quarter of 2022. Capital expenditures totaled $16.1 million and were primarily related to $7.4 million of reinvestment into existing restaurants and $5.9 million into the continued expansion of Donatos. We anticipate that 2023 CapEx related to Donatos will be complete in the second quarter of 2023 as the installations for 2023 were front-loaded in the year and are now substantially complete. We expect to continue the expansion of Donatos in 2024. We ended the quarter with approximately $49 million of cash and cash equivalents and $10 million available borrowing capacity under our revolving line of credit. At quarter end, our outstanding principal balance under our credit agreement was $213 million and letters of credit outstanding were $9 million. In view of our great start and outperformance in Q1, we are raising our financial guidance expectations for fiscal 2023. Our revised guidance is as follows: total revenue of at least $1.3 billion; comparable restaurant revenue growth of 2% to 4%. This is a new addition to our guidance that we believe will be helpful to the investment community; restaurant-level operating profit of at least 13.5%, inclusive of investments in the guest experience; selling and general administrative expense of $127 million to $132 million. The increase from our prior guidance is led by expected higher incentive compensation costs due to performance; capital expenditures from $45 million to $50 million; adjusted EBITDA from $70 million to $80 million, an increase from our original guidance of $62.5 million to $72.5 million. There is a thoughtful phasing to our investments and our approach is to earn our way to additional investments. This guidance reflects our confidence to both accelerate investments in food and labor, while also increasing our adjusted EBITDA outlook. As we look to the balance of the year, comparable restaurant sales have remained positive and better than the industry benchmarks to start the second fiscal quarter. Due to typical seasonal sales shifts and the accelerated investments, we expect second quarter restaurant-level operating profit margin to take a step back from first quarter levels, then sequentially increase through the balance of the year as cost savings achieve a full run rate. Finally, I would like to update our previous communication regarding evaluating a sale-leaseback transaction. Following our evaluation in the first quarter, we marketed an initial tranche of 10 owned properties to investors. The marketing process included multiple interested parties and multiple rounds of bidding. We are currently progressing through the final stages of documentation and diligence with the winning buyer. We expect to close the transaction in the second quarter and generate gross proceeds of approximately $30 million. We anticipate the transaction will add occupancy expense of approximately $2 million and we have incorporated an additional $1.2 million of occupancy expense into our 2023 guidance in anticipation of completing the transaction. The expected closing of this transaction supports the increase in our 2023 capital expenditure guidance. We expect proceeds from the sale-leaseback transaction will be used to repay debt, fund the capital investments and support repurchasing shares of company stock, subject to the terms of our credit agreement and Board approval. In closing, we are extremely pleased with our first quarter performance, our track for 2023 and the overall direction of Red Robin. With that, I will turn the call back over to G.J.

Thank you, Todd. We have recently announced appointments to our leadership team, including the addition today. I'd like to welcome Jyoti Lynch, our Chief Technology Officer; Kevin Mayer, our Chief Marketing Officer; Mark Simpson as Interim Chief People Officer, and congratulations to Jason Rusk on his promotion to Chief Business Development Officer. These changes complete our leadership team. I am confident these leaders will help drive the success of Red Robin and empower our people to achieve their full potential. In closing, our mission is very simple: serving up awesome American food and bottomless fun. We are empowering our operators and providing them tools and resources to succeed. The initial proof points of success are evident in our Q1 results, and we will continue to execute on our strategic plan. I remain incredibly optimistic about the future of our company, and thank you all for your interest. We will now be happy to take your questions. Operator, please open the lines.

Our first question comes from the line of Todd Brooks with The Benchmark Company.

Thanks for taking my question and congrats on some really excellent results and evident improvement in the quarter. Great job. Wanted to jump in, it's kind of a combined question. Two big areas of opportunity that you had cited were attacking the false waits and supply chain efficiency. You pointed at real progress against both in the quarter. How much of that opportunity has been harvested? How much is still in front of us as we start to think about the model and revenue trend going forward?

Hey Todd, this is Todd here. I'll start and then let G.J. add in. He mentioned some numbers that provide guidance on the false waits. Last year, we were over 10%, and now we're down to 2%, which is very encouraging progress with some room for improvement. We feel we've made significant strides in a short time. Regarding cost savings, particularly in the supply chain, we're still in the early stages in Q1. We captured just over $1 million in savings during Q1 and anticipate this will increase quickly in Q2, reaching its full potential in Q3 and Q4. We're on track with our expectations, and we expect the cost savings to ramp up through the rest of the year.

And Todd, I'll just finish up by saying that from a false wait perspective, we have some room to go, but we've made significant progress. But where we're really going to make progress as our staffing levels and our training is fully in place, is on a sales per hour perspective. You heard me quote we broke 700 sales records during the period, and that was individual sales records per hour, per week, et cetera. But the sales per hour levels that we are seeing from some of our best operators are incredible. And so that gives me great hope on what we can do here in the future.

That's great. And my final one, and I'll jump back in queue. With the rapid progress that you showed with these results and just some of the acceleration in CapEx spending and maybe faster than expected upgrading of the equipment platform behind flat-tops. Is the overall plan as you've started to dig in and execute against North Star, which I know you gave yourself a three-year window, do you feel like it's accelerating as you guys really started to work against the goals there? It feels like maybe we're getting some of the initiatives pulled forward here given the early strength that we've seen in the first part of the year.

We want to progress as quickly as we can, but I'm not ready to say we're ahead of the three-year plan yet. There's still a lot of uncertainty in the economy and other macro factors. We're pleased with our current position; I've been here for eight months, and the team has made great strides. However, I'm not ready to declare that we're extremely confident in significantly advancing our plans just yet, but we are content with where we stand.

Our next question comes from the line of Andrew Wolf with CL King.

Congratulations on the progress you've made with your customers and financially. I have a straightforward question. If I understand correctly, over 10% of guests were waiting a year ago, and now around 2% are waiting. This indicates that fewer guests are leaving. How do you correlate that data? How do you measure the actual number of guests who walked away, and how do you assess the impact on traffic from that information?

Yes, Andy, this is Todd. The data that we're capturing there is through our survey methodology. And so it's as reported by our guests. One of the key pieces, as G.J. and myself and this team got in, that was striking to us was we saw rates reported across all dayparts, all weak parts. And just to give an example there, right, we would look at our data and see our guests on an extended wait randomly, right, at 3:00 on a Wednesday afternoon, a time period that we should never be on a wait. We want to be on a wait when we're full on a Friday night, right? But it's across that breadth of the spectrum that initially caught our attention. And so the data is reported through our survey and we're looking across that full spectrum of when are we on waits? And is it because we're truly at capacity? Or is it because we truly haven't filled all of these positions yet? We're making great progress, but we know there's still more progress to come. And ultimately, we're going to look at our sales and our traffic results as it compares to the industry, as G.J. called out, right? We beat the industry on both. We continue to see that into the second quarter. And so all of those are encouraging signs to us.

I understand. Last quarter, you may have mentioned that the primary objective is to establish long-term traffic growth and to outperform, which you are currently achieving. My question is straightforward: given that the store base may not grow significantly in the near future, will the focus be on bringing back lapsed customers—those who have not visited recently due to past disappointments—or will it be more about attracting new customers from competing chains or those who prefer dining at home?

Well, I actually think the answer is both. We're working towards both. And we're just getting started. When we think about the first quarter, it's really around hospitality improvements or service, if you will, we call hospitality here. When we start implementing in the second quarter here, these changes that I spoke about from cooking to what we're doing with burgers and into the third and fourth quarter, it's going to be really, really interesting what happens, particularly with those lapsed users and even our existing guests that come with us and dine with us a lot, they are our most loyal guests. So in terms of acquiring new guests, we think that the word of mouth and some of the work that we'll do from a marketing perspective when we’re ready, will help us there as well. We've got some pretty exciting things that we'll be speaking about later in terms of how we do that. But the answer is both.

I wanted to ask about the leverage from food costs, which turned out to be a big positive surprise compared to my projections. I'm not sure if you consider it vendor consolidation or something else, but it seems the savings came along faster than expected. This situation wasn't solely due to lower inflation, as costs were still increasing. It seems the outcome primarily resulted from giving vendors the chance to sole source and benefit from higher volumes. Can you help clarify how much of this contributed to the results? Also, what can we expect moving forward in this area?

Yes, I wanted to provide some additional details. In response to your comments, we did experience commodity inflation as mentioned in our prepared remarks, which continued to exert inflationary pressure. However, we implemented price increases of just over 7% in the first quarter, which helped mitigate those pressures. Regarding cost savings, the amount for Q1 was a little over $1 million, aligning with our expectations, and we anticipate that this figure will increase throughout the year. These are the main factors driving food costs.

There are no further questions in the queue. I'd like to hand the call back to G.J. Hart for closing remarks.

All right. Well, thank you all for joining us today. We are at an exciting part of the journey here at Red Robin. We appreciate your support, and we look forward to reporting next quarter on our progress. So thank you guys very much. Take care.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.