GREENWOOD VILLAGE, Colo. - (BUSINESS WIRE) - Mar. 3, 2021 - Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB) ("Red Robin" or the "Company"), 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 and year ended December 27, 2020.
Paul J. B. Murphy III, Red Robin’s President and Chief Executive Officer, said, "2020 was a challenging year for our Team Members, for the Communities and Guests that we serve, and for our business. However, not only did Red Robin persevere, we took advantage of the opportunity created by the pandemic to improve our Guest experience and strengthen our enterprise business model. We implemented our Total Guest Experience hospitality model, optimized our management labor structure, simplified our menu, and renegotiated our lease portfolio, all of which will enable us to generate more than 100 basis points of incremental enterprise-level margin improvement when we return to pre-COVID sales volumes. In the first quarter of 2021, we also secured a second amendment to our credit facility, which provides increased near-term flexibility as we continue to de-lever our balance sheet and strategically position the brand for the future."
Murphy concluded, "There is no doubt that increased dining restrictions during the fourth quarter in California, Colorado, Oregon, and Washington had a significant, negative impact to our topline momentum. However, we are bullish as we look to the future reopening of these markets, which represented almost 40% of our 2019 restaurant sales. We are very encouraged by our recent sales trajectory, and as capacity restrictions loosen in these Western markets, we believe our geographic mix will drive sales growth that outpaces the industry. In addition, we are confident that the continued rollout of Donatos®, which we expect will generate over $60 million in annual pizza sales by 2023, higher off-premise sales, record Guest satisfaction scores, and other Company sales drivers will augment our strengthening business results and create and grow long-term value for our shareholders."
Total revenues, which primarily include Company-owned restaurant revenue and franchise royalties, decreased $101.9 million to $201.1 million in the fourth quarter of 2020, from $302.9 million in the fourth quarter of 2019. Restaurant revenue decreased $101.2 million due to a $78.2 million decrease in comparable restaurant revenue(1) and a $23.0 million decrease primarily from closed restaurants. The decrease in comparable restaurant revenue was driven by restaurants operating at limited occupant capacity for dining rooms that were opened during the quarter, off-premise only restaurants with closed dining rooms, or closed restaurants due to the COVID-19 pandemic. Restaurants which offered Donatos® in the fourth quarter outperformed non-Donatos® restaurants with similar indoor dining restrictions by over 500 basis points, partially offsetting the decline in comparable restaurant revenue.
System-wide restaurant revenue, which includes $49.9 million of restaurant revenue reported by our franchisees, for the fourth quarter of 2020 totaled $245.4 million, compared to $361.6 million for the fourth quarter of 2019.
Comparable restaurant revenue(1) decreased 29.0% in the fourth quarter of 2020 compared to the same period a year ago, driven by a 28.8% decrease in Guest count and a 0.2% decrease in average Guest check. The decrease in average Guest check resulted from a 2.9% decrease in menu mix and a 0.3% decrease from higher discounts, partially offset by a 3.0% increase in pricing. The decrease in menu mix was primarily driven by lower sales of beverages and Finest burgers as a result of limited dining room capacity at reopened restaurants and operating off-premise only at restaurants with closed dining rooms.
Net loss was $39.3 million for the fourth quarter of 2020 compared to net loss of $7.7 million for the same period a year ago. Adjusted net loss (a non-GAAP financial measure) was $27.8 million for the fourth quarter of 2020 compared to adjusted net loss of $4.7 million for the same period a year ago (see Schedule I).
Restaurant-level operating profit as a percentage of restaurant revenue (a non-GAAP financial measure) was 6.2% in the fourth quarter of 2020 compared to 18.9% in the same period a year ago. The decrease was primarily due to sales deleverage, higher hourly wages and benefits costs, and costs driven by higher off-premise sales, partially offset by pricing, favorable commodity costs, and lower janitorial and maintenance 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 loss from operations and net loss, the most directly comparable GAAP metrics.
Restaurant Revenue Performance
Other Results
General and administrative costs were $16.4 million, or 8.2% of total revenues, in the fourth quarter of 2020, compared to $19.3 million, or 6.4% of total revenues, in the same period a year ago. The decrease was primarily driven by a decrease in Team Member salaries and wages from the reduction in force, travel and entertainment costs, and professional services and legal fees, partially offset by higher Team Member benefit costs.
Selling expenses were $7.9 million, or 3.9% of total revenues, in the fourth quarter of 2020, compared to $16.5 million, or 5.4% of total revenues, during the same period a year ago. The decrease was primarily driven by a reduction in national and local media spend.
Other charges in the fourth quarter of 2020 included $6.9 million of restaurant closure costs, $6.2 million of restaurant asset impairment, $1.9 million of litigation contingencies, and $0.6 million of COVID-19 related costs related to the purchase of personal protective equipment for our Team Members and Guests and emergency sick pay provided to restaurant Team Members.
The tax benefit for the twelve weeks ended December 27, 2020 was $3.2 million, compared to a tax expense of $7.3 million for the twelve weeks ended December 29, 2019. The increase in tax benefit for the twelve weeks ended December 27, 2020 is primarily due to a decrease in income, partially offset by the recognition of $8.7 million of additional valuation allowance during the quarter. The Company was able to carry back federal net operating losses and receive $49.4 million in cash tax refunds during the year ended December 27, 2020, including interest, and expects to generate approximately $16 million of additional net operating loss cash tax refunds within the next 12 months.
Financial Highlights for the Fiscal Year Ended December 27, 2020 Compared to the Fiscal Year Ended December 29, 2019
Total revenues for the fiscal year ended December 27, 2020 were $868.7 million, a decrease of $446.3 million from the fiscal year ended December 29, 2019, primarily due to the COVID-19 pandemic, including limited occupant capacity as we reopen dining rooms, operating an off-premise only model at our restaurants with closed dining rooms, and closed restaurants. GAAP loss per diluted share was $19.29 in 2020 compared to GAAP loss per diluted share of $0.61 in 2019, and adjusted loss per diluted share was $11.33 compared to adjusted earnings per diluted share of $0.62 in the prior year. See Schedule I for a reconciliation of adjusted (loss) earnings per diluted share (each, a non-GAAP financial measure) to GAAP net loss and GAAP loss per diluted share. Off-premise sales, including take-out, delivery, and catering, increased 136.2% during 2020, now comprising 41.1% of total food and beverage sales. For fiscal year 2020, comparable restaurant revenue(1) decreased 28.5%, and comparable restaurant Guest count decreased 27.7% compared to 2019.
Restaurant Portfolio
The following table details restaurant unit data for Company-owned and franchised locations for the periods indicated:
Balance Sheet and Liquidity
As of December 27, 2020, the Company had total debt of $170.6 million, of which $9.7 million was classified as current. The Company made net repayments of $45.4 million on its Amended and Restated Credit Agreement (the "credit facility") during the fourth quarter of 2020. As of December 27, 2020, the Company had outstanding borrowings under its credit facility of $169.8 million, in addition to amounts issued under letters of credit of $8.7 million, and liquidity of approximately $128.0 million including cash on hand and available borrowing capacity under its credit facility.
Due to the prolonged nature of the pandemic, the Company entered into the Second Amendment to the Amended and Restated Credit Agreement (the "Second Amendment") on February 25, 2021. The Second Amendment provides increased financial flexibility in the near-term, as we continue to de-lever our balance sheet. The Company obtained a waiver of certain financial covenants through July 11, 2021, followed by the introduction of more favorable covenant levels through the second quarter of 2022. As of the end of the second fiscal period ending February 21, 2021, the Company had approximately $122 million in liquidity, including cash on hand and available borrowing capacity under its credit facility. This liquidity amount includes the impact of a one-time cash payment of $8.5 million, during the first quarter of 2021 associated with a legal settlement.
COVID-19 Business Update
As of February 28, 2021, the Company had 441 total (comparable and non-comparable) restaurants. 12 Company-owned restaurants remained temporarily closed due to the COVID-19 pandemic as of February 28, 2021 and may be reopened in 2021.
Net comparable restaurant revenue and average weekly net sales per Company-owned restaurant for the Company's 28 day accounting periods through the second period of fiscal year 2021 and the most recent week ended February 28, 2021 are as follows:
Restaurants with Open Indoor Dining Rooms
As of February 28, 2021, the Company had reopened 372 total (comparable and non-comparable) indoor dining rooms with limited capacity, representing approximately 87% of currently open Company-owned restaurants. Notably, these restaurants have on average maintained off-premise comparable sales that are more than two times what we generated before the pandemic after reopening dining rooms.
Net comparable restaurant revenue and average weekly net sales per Company-owned restaurant with reopened indoor dining rooms for the Company's 28 day accounting periods through the second period of fiscal year 2021 and the most recent week ended February 28, 2021 is as follows:
We expect that the recovery of our West Coast restaurants will provide significant average comparable restaurant revenue benefits as the dining rooms continue to reopen. As of our fiscal second period, the majority of our restaurants in our West Coast market were open at limited capacity or had closed dining rooms. The restaurants in these states had average weekly net sales per restaurant as presented in the table below:
We also expect to see continued benefits from outdoor seating expansion of approximately 16 to 24 incremental seats at restaurants where jurisdictions and weather allow, representing approximately 10% incremental seating capacity on average per restaurant.
We believe Donatos® will generate annual Company pizza sales of more than $60 million and profitability of more than $25 million by 2023, when we expect to have completed our rollout to approximately 400 Company-owned restaurants. In 2021, we plan to add Donatos® to approximately 120 restaurants, bringing the total number of Company-owned restaurants that offer Donatos® to approximately 200 by the end of the year. We expect restaurants with Donatos® to drive incremental flow-through of $45 thousand in the second year, yielding a three to four year payback period. First year startup costs include pre-opening expense of $12 thousand, required first year marketing investments of $30 thousand, and capital of $145 thousand per restaurant.
As we look ahead to a post-pandemic operating environment, we are preparing our Team Members with a "Ready-Set-Reopen" training playbook to ensure a great experience as our Guests return to our dining rooms. This prescriptive guide addresses short, medium, and long term actions required to continue building satisfaction with our Guests and guides best practices for resuming the operation of our indoor dining rooms at 100% capacity.
We also have several technology solutions we plan to roll out in late 2021, including website enhancements and a new Red Robin mobile app. These initiatives are cost-effective channels to engage on a direct and personalized level with our Guests. Our technology platforms are expected to grow revenue through higher order conversion and increased Guest frequency, while driving additional Royalty™ participation. Additionally our new loyalty platform will allow us to better segment our Guests and target marketing campaigns in a more meaningful way.
Our off-premise execution enhancements support our ability to retain off-premise food and beverage sales of more than twice pre-pandemic levels while operating at 100% indoor capacity. In the fourth quarter of 2019, off-premise sales comprised approximately 14% of total food and beverage sales.
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. Due to the uncertainty caused by the on-going COVID-19 pandemic, limited guidance is being provided for fiscal year 2021.
The Company currently expects the following in 2021:
Red Robin will host an investor conference call to discuss its fourth quarter and full year 2020 results today at 5:00 p.m. ET. The replay will be available through Wednesday, March 10, 2021.
The call will be webcast live and later archived from the Company's website under the investor relations section.
Forward-looking statements in this press release regarding the Company's future performance, demand and business recovery, growth drivers, long-term value creation, revenue and comparable revenue growth, sales and profitability including sales trajectory, off-premise sales, incrementality, enterprise margin improvement, preliminary results including net comparable restaurant revenue and average weekly net sales per restaurant, NOL cash tax refunds, capital expenditures including restaurant maintenance and infrastructure and rollout of Donatos® to additional locations and timing thereof, digital guest and operational technology solutions, and off-premise execution enhancements, 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," "could," "should," "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 impact of COVID-19 on our results of operations, supply chain, and liquidity; the effectiveness of the Company's strategic initiatives, including alternative labor models, service, and operational improvement initiatives; our ability to train and retain our workforce for service execution; the effectiveness of the Company's marketing strategies and promotions; menu changes and pricing strategy; the anticipated sales growth, costs, and timing of the Donatos® expansion; the implementation, rollout, and timing of new technology solutions; our ability to achieve revenue and cost savings from off-premise sales and other initiatives; competition in the casual dining market and discounting by competitors; changes in consumer spending trends and habits; changes in the cost and availability of key food products, distribution, labor, and energy; general economic conditions, including changes in consumer disposable income, weather conditions, and related events in regions where our restaurants are operated; the adequacy of cash flows and the cost and availability of capital or credit facility borrowings; the impact of federal, state, and local regulation of the Company's business; changes in federal, state, or local laws and regulations affecting the operation of our restaurants, including minimum wages, consumer health and safety, health insurance coverage, nutritional disclosures, and employment eligibility-related documentation requirements; costs and other effects of legal claims by Team Members, franchisees, customers, vendors, stockholders, and others, including negative publicity regarding food safety or cyber security; 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.
SOURCE Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB)
Red Robin Gourmet Burgers, Inc., a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc.