Good afternoon, ladies and gentlemen. Welcome to the Good Times Restaurants Inc. Fiscal 2021 Second Quarter Earnings Call. By now, everyone should have access to the company's earnings release and 10-Q filing, which are 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 their 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.

The 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. Please note, this event is being recorded. And now I would like to turn the call over to Ryan. Please go ahead, sir..

Thank you, Grant. Thank you all for joining us on the call today. We're excited about both of our brands' performance during this quarter.

As restrictions on dining rooms have eased here in Colorado, we've not seen significant negative impact on the Good Times business, which continues to post strong same store sales and near record high average weekly sales, which were eclipsed only during last year's third quarter, a time that seasonality historically has indexed at its highest and specifically last year, a time when dining room restrictions in Colorado were at their peak and general fear of indoor dining was its most intense.

At Bad Daddy's, our March sales approached 2019 average weekly sales at approximately 7% below 2019 levels. And on a same store basis, sales were flat to 2019 in April and began to exceed 2019 sales levels this May.

We continue to believe that our focus on speed, accuracy and consistent execution at our Good Times Drive-Thrus have driven improved customer experiences versus what we had delivered in prior years.

The pivot we made in early fiscal 2020, including slight menu modifications and minor equipment investments to improve our ability to effectively hold fries and other items for short periods of time rather than cooking every customer's check to order, set us up well not just for the initial sales shortfall Good Times experienced in April 2020.

But for the subsequent sales lift that we saw beginning in May 2020 and that has continued to this day. We believe the improved customer experience has created repeat customers and long-term loyalty that we expect to stay with us as we return to more normal operating conditions in Colorado.

At Bad Daddy's, our steadfast commitment to scratch cooking in our kitchens, including our housemade sauces, hand cut fries and chips and bold flavorful burger builds, differentiate us from a sea of sameness that exists among casual dining barn grill and burger concepts.

We reduced the size of our menu during the pandemic, and it continues to remain smaller than it was at the pandemic's onset. However, we never eliminated menu items that we believed were truly unique, and we've since added a few additional items to the menu based on feedback both from our customers and our operators.

Innovation in taste and flavors will continue to be a part of the ongoing evolution of our menu. However, executing our core menu exceptionally well is our primary objective. As other concepts have reported and has been mentioned repeatedly in various new stories, the labor market has become very tight.

Additionally, while our voluntary turnover among restaurant managers has declined, we find that much of that turnover, whether at hourly or management levels, skews towards employees finding jobs in different industries rather than moving to other restaurants.

We believe it's important for employees and the public to see careers in our industry's fulfilling with significant growth potential.

And to that end, we do see some level of margin compression in future quarters as we adjust pay and provide incentives to remain competitive, while at the same time, providing meaningful roles and development opportunities for all of our employees.

Doing so is part of creating an organization that provides a culture and work environment that people want to be a part of and are proud to represent. Let's review this quarter's results.

At Bad Daddy's, restaurant sales during the quarter were $21 million compared to $19.3 million during last year's second quarter, with 481 restaurant operating weeks in both years second quarter.

The increase in sales was affected by reduced traffic in January and February due to reduced capacity dining rooms associated with the COVID-19 pandemic, offset by increases in traffic in March as combined on and off premise sales began to achieve pre-pandemic levels and as we began to roll over restrictions that were imposed in March 2020.

Same store sales increased 9.1% during the quarter, with 33 Bad Daddy's in the comp base at the end of the quarter. Cost of sales at Bad Daddy's were 28.0%, a 220 basis point decrease from last year's quarter.

The result of higher average menu pricing associated with a greater share of sales through third-party delivery services, generally favorable commodity pricing, partially offset by increased packaging costs.

As noted in our last quarter results, cost of sales for Bad Daddy's now includes the cost of packaging materials, and prior year results have been reclassified to conform to our current year's presentation. Bad Daddy's labor costs decreased by approximately 500 basis points compared to the prior year quarter to 33.3% for the quarter.

This year-over-year decrease is primarily due to reduced front of house staffing levels, accompanying limited occupancy of dining rooms during the quarter, 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.

As noted in our call during the prior quarter, the cost of restaurant managers in training for existing restaurants was previously treated as a general and administrative expense, where it is now treated as part of restaurant labor costs. Again, prior year amounts have been reclassified to conform to the current presentation.

Overall restaurant level operating profit, a non-GAAP measure for Bad Daddy's was approximately $3.8 million for the quarter or 18.3% of sales compared to $2.3 million or 11.9% last year. This is due to improvements in cost of sales and labor, partially offset by increased delivery commissions accompanying a higher mix of delivery sales.

Restaurant sales at Good Times were $8.0 million an increase of $1.3 million driven by the strong 22.9% same store sales increase during the quarter, offset by reduced number of restaurant operating weeks, resulting from the previously reported closure of one Good Times in the prior quarter.

We have seen that customers have continued to demonstrate a preference for drive thru service and believe that our shift in focus to speed, accuracy and consistency of execution have generated goodwill and allowed us to capture new long-term customers.

Food and packaging costs for Good Times were 29.0% for the quarter, a decrease of 180 basis points compared to last year's quarter. Good Times had relatively similar blended commodity costs to the prior year, offset by higher menu pricing. Good Times food costs have historically included paper and packaging costs.

Total labor costs for Good Times decreased to 33.3% from 37.7% for the quarter last year. We continue to see benefits from the leveraging of increased sales with our focus on staffing for volume and speed of execution, improving both the customer experience and labor productivity.

Good Times restaurant level operating profit increased by $0.8 million for the quarter to $1.5 million.

As a percent of sales, restaurant level operating profit increased by 840 basis points versus last year to 18.9%, due again primarily to higher sales and the leveraging of fixed costs accompanied by lower cost of sales, lower cost of labor and partially offset by the higher costs of delivery commissions.

General and administrative expenses were $2.4 million during the quarter or 8.3% as a percent of total revenues. This represents a $0.8 million increase versus the prior year quarter.

G&A expenses increased versus the prior year due to increased stock compensation expense associated with a one-time option grant to the company's CEO, the addition of finance and technology leaders to the senior leadership team, legal and professional fees and increased costs associated with multi-unit and senior management incentive compensation.

Of note, in the prior year quarter, multi-unit and senior management bonus cost accruals were minimal due to the outbreak of the COVID-19 pandemic. Our net income to common shareholders for the quarter was $1.1 million or $0.09 a share versus a loss to common shareholders of $14.9 million or $1.19 per share in the second quarter last year.

For the year-to-date period, our net income to common shareholders was $1.9 million or $0.15 a share for the quarter versus a loss of $15.7 million or $1.25 per share in the prior year quarter. Adjusted EBITDA for the quarter was $2.3 million compared to $0.8 million for the second quarter of 2020.

For the year-to-date period, our adjusted EBITDA was $4.9 million versus adjusted EBITDA of $2.3 million for the same period in fiscal 2021. Note that the same year-to-date period in fiscal 2020 was 27 operating weeks versus 26 operating weeks in the current year period.

We finished the quarter with $11.2 million in cash, $3.5 million outstanding on our credit facility with Cadence Bank and $11.7 million in outstanding Paycheck Protection Program loans. We applied for forgiveness on those PPP loans on April 30, 2021.

At the current time, we expect to finance future development, primarily from cash flow generated by the business. And we believe that, even as we expect to open two new Bad Daddy's restaurants this year, we can continue to strengthen our balance sheet by further reducing leverage.

We expect our next restaurant in Marietta, Georgia to open in early June and our second restaurant in Montgomery, Alabama to open in early September. We expect to open at least two restaurants in fiscal 2022.

Due to the continued uncertainty associated with the COVID-19 pandemic, we did not provide specific guidance for the balance of the year although we reiterated, as previously announced, the intent to open those two restaurants during the final two quarters of the fiscal year and capital expenditures for the full year of between $3.2 billion and $3.5 million, including $1.0 million to $1.2 million of recurring maintenance capital expenditures.

During fiscal 2020, to preserve liquidity, we suspended discretionary CapEx and as a result are experiencing greater capital expenditures on restaurants during fiscal 2021 than the typical year. We're pleased with this quarter's results, which has set us up well for the balance of the year. With that, Grant, we'll open the call for questions..

[Operator Instructions] There appear to be no questions at this time..

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Thank you, Grant..

Sure. I would like to turn this conference back over to Ryan for closing remarks..

Thanks, again. Midway through our fiscal year, we continue to delever our balance sheet and build a foundation for future growth financially. However, beyond that, we continue to develop a culture of both of our concepts that will enable us to effectively compete in the labor market for high quality, talented employees to share our values.

Our restaurant leaders have fought fearlessly through a pandemic and now as the country's economy rebounds, are winning the fight against one of the most competitive labor markets we have seen.

I couldn't be more proud of the restaurant general managers and their teams at both of our brands as we continue to serve great food, create great experiences for our guests through genuine hospitality and take pride in building an organization that creates value for our customers, for our employees and for our shareholders.

With that, we will conclude today's call. Thank you all for joining us today..

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