Good afternoon, ladies and gentlemen. Welcome to the Good Times Restaurants Inc. Fiscal 2020 Fourth Quarter Earnings Call. By now, everyone should have access to the company’s earnings release, which is available in the Investors section of the company’s website.

As a reminder, a part of today’s discussion will include forward-looking statements within the meaning of federal securities laws. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them.

These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and therefore, investors should not place undue reliance on them, and the company undertakes no obligation to update these statements to reflect the events or circumstances that might arise after this call.

The company refers you to the recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions, including risks related to the COVID-19 pandemic. Lastly, during today’s call, the company will discuss non-GAAP measures, which they believe can be useful in evaluating our performance.

Presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliation to comparable GAAP measures available in our earnings release. And now I would like to turn the call over to Ryan. Please go ahead, sir..

Thank you, Matt, and thank you all for joining us on the call today. As all of you are aware, the COVID-19 pandemic continues to be an unpredictable and formidable challenge for the country, and in particular for the casual dining segment of the restaurant industry.

I am proud of the efforts and the performance of the leadership and the team members here at Good Times as we’ve adapted to the dynamic environment that we find our restaurants now operating in.

Our Good Times business, which much like the rest of the industry saw an immediate contraction of sales in March and early April, saw traffic bounce back throughout the remainder of our fiscal year as customers began to view the drive-thru is a safer way to experience restaurant dining.

To that end, we reported 10% comps for the quarter and nearly 8% comps for the year at Good Times. In addition, we’ve seen, as evidenced by the 15% comps in October and a 22% comps in our fiscal November that we’ve reported in our earnings release, that this strength in sales has been maintained into the first quarter of fiscal 2021.

We further believe that the focus we’ve placed on the speed of our drive-thru has resulted in repeat business of former relapsed or even first-time users of the brand as they know that even with the longer stack of cars in the drive-thru, our customers can rely on us to provide quick, accurate service.

We concluded the fiscal year with all of the dining rooms in our Bad Daddy’s reopened, though at various levels of occupancy limitations. We posted same-store sales declines of 12% for the quarter and 17.7% for the year with the largest decline having been during the fiscal third quarter.

We approached flat comps in November, but with the closing of the dining rooms in Colorado late November and a generally increased awareness of the virus nationwide, we saw same-store sales declines of approximately 8% during our fiscal month of November.

We believe that our product selection with bold flavors and burger builds that you just can’t find anywhere else, along with our commitment to scratch cooking and high-quality ingredients has aided us in retaining a significant portion of our pre-pandemic sales.

Our menu was initially reduced during our first round of dining room closures, but we strategically added back existing and even added some new items to the menu with a focus on those items that we could efficiently execute in our kitchens but that still represented our Bad Daddy’s brand very well.

We continue to operate our dining rooms at Bad Daddy’s in Oklahoma and in the southeast part of the country where we have not yet seen new restrictions on indoor dining.

In Colorado, however, we closed our dining rooms at Bad Daddy’s in November in response to new restrictions placed upon us by the state but have continued to offer on-premise dining at our existing patios and in select locations and expanded outdoor dining beyond those existing patios.

Although most of our Bad Daddy’s patios already were either partially or fully covered and had either electric or gas heating, we have made investments to improve heating and provide wind protection where possible to expand the range of weather conditions in which outdoor dining is comfortable and practical for our guests.

In addition, we’ve seen that the restrictions on indoor dining has resulted in increased traffic at our Good Times drive-thrus.

Throughout the pandemic, to keep our employees and guests safe, we have implemented stringent practices to ensure that employees who have actual or suspected exposure to the virus do not work in our restaurants and that those that are exhibiting symptoms of illness of any sort do not work.

To that end, we have programs in place to provide for paid leave for all employees who have been exposed or are currently exhibiting symptoms of COVID-19 and have had these programs in place since early in the pandemic. We launched a virtual brand Bad Mama's Chicken in November in a limited number of locations.

This virtual brand is executed out of the existing kitchens we have in some Bad Daddy’s restaurants and has been designed to leverage the culinary strengths that has been developed in Bad Daddy’s.

While many companies are launching virtual brands, we envisioned Bad Mama’s as an extension of Bad Daddy’s, focusing on our chicken wings and tenders, products that we already make but merchandizing them separately under a chicken brand in order to create a concept people will think of when they are specifically looking for chicken.

We believe that the final product that we deliver to our customers is differentiated from many of the other virtual chicken concepts, as just like Bad Daddy’s we use fresh jumbo wings and fresh chicken tenders at Bad Mama’s. We have two leases that were executed back in fiscal 2019 related to expected Bad Daddy’s locations.

We worked with landlords in early fiscal 2020, even before the pandemic emerged to delay construction as we work to rebuild our balance sheet. We expect during fiscal 2021 to complete construction on a location in Marietta, Georgia that we had previously started, and to commence and complete construction on a location in Montgomery, Alabama.

We have modified the plans for both of these locations to better support our off-premises business through a dedicated curbside entry way and expect to additionally deliver enhanced customer-facing and inter-restaurant order management technology at these locations.

We also expect to begin searching for locations in existing markets of the southeast to target for fiscal 2022 developments.

As indicated in our press release, we expect development to be in a more modest pace out of existing cash flow to maintain a strong balance sheet and to ensure our operation teams are not underly stressed and lose focus on excellent operations in our existing restaurants. Let’s review this quarter’s results.

At Bad Daddy’s, restaurant sales during the quarter were $19.3 million, compared to $20 million during last year’s fourth quarter. We had approximately 49 more store weeks this quarter versus the same quarter last year, offset by reduced traffic accompanying closed and reduced capacity dining rooms associated with the COVID-19 pandemic.

33 Bad Daddy’s were in the comp base at the end of the quarter.

Cost of sales at Bad Daddy’s were 27.0% for the quarter, a 230-basis-point decrease from last year’s quarter, the result of higher average menu pricing associated with a greater share of sales through our third-party delivery services, reduced waste associated with menu optimization and generally favorable commodity pricing.

Bad Daddy’s labor costs decreased by approximately 480 basis points, compared to the prior year quarter to 33.7% for the quarter.

This year-over-year decrease is primarily due to reduced front of house staffing levels, accompanying limited occupancy of dining rooms, improved back of house productivity and the reduction of management staffing levels from an average of five managers per restaurant to four managers per restaurant.

Overall, restaurant level operating profit, a non-GAAP measure for Bad Daddy’s was $3.3 million for the quarter or 17.1% of sales, compared to $2.7 million, or 13.3% last year.

This was due to improvements in cost of sales and labor, partially offset by sales deleverage of fixed cost and increased delivery commissions, accompanying a higher mix of delivery sales. Restaurants at Good Times increased to $9 million, driven by strong positive comparable sales during the quarter.

Food and packaging costs for Good Times were 31.1% for the quarter, a decrease of 10 basis points compared to last year’s quarter. Good Times had slightly elevated commodity costs, offset by higher menu pricing and improvements in product waste. Total labor cost for Good Times decreased to 31.8% from 35.9% of sales for the quarter last year.

This was the result of leveraging increased sales, our focus on staffing for volume and our speed of execution, which has improved labor productivity. Good Times’ restaurant operating profit increased by $0.5 million for the quarter.

As a percent of sales, the restaurant level operating profit increased by 480 basis points versus last year to 20.0%, due primarily to higher sales accompanied by lower cost of sales, lower cost of labor, and partially offset by higher cost associated with delivery commissions.

General and administrative expenses were $1.6 million during the quarter, or 5.5% as a percent of total revenues. This represents a decrease of $1.4 million versus the prior year quarter and a 490 basis point decrease on a percent of sales basis.

G&A expenses for last year’s quarter included $0.7 million of severance costs and approximately $0.3 million of non-cash stock compensation costs associated with the separation of a former CEO.

Additionally, this quarter’s G&A expenses decreased due to larger spans of controls at Bad Daddy’s, lower manager training costs, as well as reduced restaurant support center staffing, compared to the prior year.

We recorded the impairment of long-lived assets of approximately $0.3 million related to one Good Times restaurant in a remote suburban market of Denver. Our net income for the quarter was $1.5 million versus a loss of $4.2 million in the fourth quarter last year.

Despite significantly lower sales at Bad Daddy’s, incremental sales at Good Times, improvements in operating efficiencies at both brands and the comparison against non-recurring severance costs in the prior year allowed us to deliver significantly better bottom-line results.

For the year, our net loss was $13.9 million, primarily driven by $15.6 million of goodwill and long-lived asset impairments. Adjusted EBITDA for the year was $7.6 million, compared to $5.4 million in fiscal 2019.

We finished the year with $11.5 million in cash and $5.5 million outstanding on our credit facility with Cadence Bank, and $11.7 million in outstanding Paycheck Protection Program loans. Subsequent to the end of the year, we closed one Good Times restaurant that previously had impairment charges recorded against it.

That restaurant has been a marginal performer for years and we are in the process of subleasing it to an unrelated party. We provided guidance for the first quarter of fiscal 2021 with net income expected to be between $0.4 million and $0.6 million and adjusted EBITDA of $1.5 million to $1.7 million.

Our sales for the quarter at Good Times have been strong solidly double-digit and our sales have remained similarly strong in December.

Sales were in the mid to high-single-digit negative range at Bad Daddy’s and have softened a bit in December as the full impact of Colorado dining room locations – dining room closures have been realized and as traffic in general has not seasonally increased due to the reduction in holiday shopping at bricks and mortar shops.

Despite softer same-store sales in October and November, we believe that Bad Daddy’s has continued to outperform the casual dining segment as measured by NAFTrack and Black Box Intelligence.

We began the year with a shift from growth to retrenchment, found ourselves six months into the year with the emergence of the pandemic that plunges into an existence of crisis, but with a combination of agility, hard work, Cares Act funding, and two strong concepts that resonate with our customers, we found ourselves at the end of the fiscal year in a position to weather a challenging fall in winter, complete two new restaurants originally committed to in 2019 and begin thinking about future growth.

At the same time we remained firmly committed to fiscal discipline and a strong balance sheet, a culture that drives accountability and ownership of results at all levels, a team that embraces innovation, and ultimately great restaurants that are the outcome of genuine hospitality and operations excellence.

With that, Matt, we’ll open the call for questions. .

[Operator Instructions] Our first question comes from Walter Morris with Baraboo Growth. Please go ahead. .

Thank you. Let me congratulate you Ryan, and the team for this exceptional performance. There is no doubt you are performing way above industry standards. So, congratulations. Great performance.

My specific question coupled at least to start, you are doing an incredible job on G&A, which G&A levels roughly half of prior year level in the September quarter.

How has that been accomplished? And to what extent is that sustainable going forward? Also, with the expected two new stores in fiscal 2021, what kind of CapEx budget are we looking at in 2021 compared to expected cash flow from the operating business?.

Certainly. So, Walter, thank you first for the congratulatory words. I definitely appreciate it. As it relates to G&A, I would first highlight that last year’s quarter did have the separation costs associated with our former CEO, and so those were non-recurring costs in the former year.

I would say that our G&A load right now, we expect a little of additional G&A spend, and I would look at our nominal G&A dollars for this quarter; and I think on a quarterly basis, we might see a little bit of accretion from that, but we don’t expect significant large increases in G&A.

I would say, we do expect to invest in a new human resource management system we expect to – which, our current one is very antiquated. We expect to invest in some new operations management – operations performance measurement systems. And the other thing I would highlight is we did make a couple of higher-level new hires.

We did hire a Director of Technology who also serves as our innovation leader for the whole company. We made that hire late in the quarter and we additionally hired an Assistant Controller shortly after the beginning of this first quarter.

So, there is little bit of increased G&A spend that we can expect, but I think as it compares to our former levels of G&A, I don’t think we are immediately going back to that. And I would also comment that as it relates to kind of the next two restaurants, we probably don’t need additional multi-unit management for that.

However, kind of once we add – once we get into 2022, our stance of controls will be at a point where we’ll have to start making that decision. Now, as it relates to your second question which was related to CapEx, we haven’t provided guidance for the full fiscal year, and I am reluctant to do so on this call.

Just as highlighted in the release, there is so much uncertainty still that is out there.

However, I would say, we expect during the first quarter that our EBITDA will be in the $1.5 million range, and I think from a CapEx - and we would expect I think particularly later in the spring and summer, we would certainly hope that the pandemic would be easing and some of the restrictions will be easing by late spring and throughout the summer.

And so, I’d say, some that we are confident in being able to continue with these projects, I would say, we have probably about $1.7 million to $1.8 million worth of capital expenditures associated with these two stores. We did begin the Marietta location last year, and so we already have some existing CapEx related to that. .

Excellent. Thank you. Again, great results. .

Thank you again, Walter. .

This concludes our question-and-answer session. I would like to turn the conference back over to Ryan for any closing remarks..

Thank you again, Matt. This year’s results are the direct results of the higher levels of collaboration and teamwork by the team that we’ve achieved in the past; and as always, I want to thank the leaders within Good Times for their strong leadership and the entire team whether leaders or individual contributors for their strength through adversity.

Sharing a meal with others is nearly is all this human society itself and this pandemic will not eliminate our physical need to eat nor is it going to destroy the emotional desire to socialize with others over a meal.

Our vision for our company is to develop and grow concepts that provide people with a way to satisfy their physical need for food but more than that to satisfy and enhance the emotional fulfillment that so often accompanies the meal.

I am excited and confident in the future for restaurants in general, but especially for our concepts for Good Times and for Bad Daddy’s. With that, we’ll conclude today’s call. Thank you all for joining us today. And I wish you safe and healthy – wish you health and safety in this time of the pandemic. Thank you. .

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..