Good afternoon, ladies and gentlemen. Welcome to the Good Times Restaurants Inc. Fiscal 2023 Second 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 Web site.

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

These statements involve known and unknown risks, which may cause the company's actual results to differ materially from the results expressed or implied by the forward-looking statements.

Such risks and uncertainties include, among other things, the market price of the company's stock prevailing from time to time, the nature of other investment opportunities presented to the company, the company's financial performance and its cash flows from operations and general economic conditions, which could adversely affect the company's results of operations and cash flows.

These risks also include such factors as the disruption to our business from the COVID-19 pandemic and the impact of the pandemic on our results of operations, financial condition and prospects, which may vary depending on the duration and extent of the pandemic and the impact of federal, state and local governmental actions and customer behavior in response to the pandemic, the impact and duration of stacking constraints and wage increases for employees at our restaurants, the impact of supply chain constraints and the current inflationary environment and the uncertain nature of current restaurant development plans and the ability to implement those plans and integrate new restaurants, delays in developing and opening new restaurants because of weather, local permitting or other reasons, increased competition, cost increases or shortages in raw food products and other matters discussed under the Risk Factors section of Good Times Annual Report on Form 10-K for the fiscal year ended September 27, 2022, filed with the SEC and other filings with the SEC.

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. And now I'd like to turn the call over to Ryan. Please go ahead, sir..

Thank you, David, and thank you all for joining us on the call today. As mentioned, everyone should now have access to our second quarter earnings release and our 10-Q filing.

It is exciting for us to again report growth in same-store sales at both brands this quarter, and additionally, to be able to report traffic increases compared to the prior year at Bad Daddy's.

We are also pleased to report improvement in restaurant level margin this quarter compared to the prior year, driven by improved food costs at Bad Daddy's and continued strong labor productivity at Good Times.

As both of our brands have meaningful seasonality, the March quarter generally reflects the lowest restaurant margins of the year, and we expect both brands to have sequential improvements in the June quarter as we leverage higher average weekly sales.

This is particularly noticeable at Good Times, where the concentration of our restaurants in Colorado results in weather-driven seasonality that is greater than we find at Bad Daddy's with greater geographic diversity.

We have continued to prioritize product quality, hospitality and service and reinvestment into our facilities, including addressing long-term deferred maintenance items.

This is about the continuing to improve our existing operations will translate into strong long-term financial returns compared with concentration of our restaurants in Colorado results in weather-driven seasonality that is greater than we find at Bad Daddy's with greater geographic diversity.

We have continued to prioritize product quality, hospitality and service and reinvestment into our facilities, including addressing long-term deferred maintenance items.

This is about the continuing to improve our existing operations will translate into strong long-term financial returns compared with aggressive unit level growth at the cost of deferring repairs on existing restaurants or compromising on the guest experience, which may generate initially strong but short-lived financial benefits.

Nevertheless, we've begun construction on our new Bad Daddy's restaurant in Madison, Alabama, which is greater-Huntsville, and we expect to open late this fiscal year. We also completed our remodel of the Greenville, South Carolina Bad Daddy's in early April, and it has reopened a stronger sales than prior to closure.

We treated this remodel and reopen like a new unit.

We retain team members by having them work shifts in our other greenfield Bad Daddy's, hired additional employees and retrained all of our hourly team members working in the restaurant, whether new or returning in our typical new unit training program and have reflected those in other typical opening costs as such in our financials.

Further, as we discussed last quarter, we purchased the interest in 5 Bad Daddy's in North and South Carolina, previously held by affiliates of the concept's original founder, and we could not be more pleased with the continued strong results from this portfolio of restaurants.

We purchased interest, which range from approximately 25% to 75% ownership in individual restaurants from these partners and continue to see this acquisition as incremental to earnings and free cash flow.

At Good Times, we have continued to see strong sales, and we continue to make investments in the form of creating signage, of which we expect to have approximately half of our system completed by the end of this fiscal year.

As we have shifted from a speed at all cost model to one where we are balancing the need for speed, a price of entry in the QSR space with improved friendliness and higher quality levels through improved product holding targets and procedures, refinements to our burger cooking procedures and elimination of one of our fried potato products, we expect to both benefit speed and quality.

We also have a plan to replace the menu panels in our few restaurants with dining rooms and at our walk-up ordering windows at our double drive-thrus with digital menus, similar to what has already been completed in the drive-thru.

This will serve to further communicate a modern and contemporary brand and eliminate one key element that currently communicates outdated and antiquated. Finally, we've balanced these investments and programs with returning cash to shareholders in the form of our share repurchase program. We purchased approximately 167,000 shares this quarter.

As this program is executed under the safe harbor rules, our purchase volume is limited by those rules and the most significant of which is related to trading volume. And so we expect that due to increasingly limited float and reduced trading volume for our repurchases to be of similar or lesser shares in future quarters.

I'll now pass it over to Matthew to review this quarter's results..

Thank you, Ryan. It's a pleasure to be on the call today. Total revenues increased 3.5% to $34.8 million for the quarter. Total restaurant sales increased $1.2 million to $34.6 million for the quarter. Total restaurant sales for Bad Daddy's restaurants increased $0.9 million to $26.3 million for the quarter.

Sales were positively impacted due to stronger customer traffic as well as increased menu prices. The average menu price increase was approximately 3.4%. Same-store sales increased 4.6% during the quarter with 39 Bad Daddy's in the comp base at the end of the quarter.

Cost of sales at Bad Daddy's was 30.6% for the quarter, a 70 basis point decrease from last year's quarter, still showing high food and packaging costs as seen through inflationary and supply chain pressures, but hopefully, we've rounded the corner and we'll continue to see improvement throughout the year.

Bad Daddy's labor cost increased by 30 basis points compared to the prior year quarter to 34.7% for the quarter. The increase as a percentage of sales reflects higher wage rates. Occupancy costs at Bad Daddy's decreased 20 basis points to 6.4%.

Bad Daddy's other operating costs increased by 10 basis points compared to the prior year quarter to 14.5% for the quarter. This slight increase is primarily due to higher increased delivery charges and restaurant supply costs.

Overall, restaurant-level operating profit, a non-GAAP measure, for Bad Daddy's was approximately $3.6 million for the quarter or 13.8% of sales compared to $3.4 million or 13.3% last year. The decline is primarily due to the increased cost of labor and other restaurant operating costs.

Restaurant sales at Good Times were $8.2 million, an increase of $0.3 million. The average menu price increase for the quarter was approximately 10.5% over the same prior year quarter. Same-store sales increased 7.6% for the quarter.

Food and packaging costs for Good Times were 31.6% for the quarter, an increase of 20 basis points compared to last year's quarter, again, the result of inflationary pressures on food and packaging materials. Total labor costs for Good Times decreased to 34.6% from 35.6% for the quarter last year due to increased productivity.

Occupancy cost at Good Times were 8.9%, an increase of 10 basis points from the prior year quarter. Good Times other operating costs were 12.3% for the quarter, a decrease of 30 basis points due primarily to slight reductions in repair and maintenance and utility expenses.

Good Times restaurant-level operating profit increased by $0.1 million for the quarter to $1.0 million. As a percent of sales, restaurant-level operating profit increased by 110 basis points versus last year to 12.5% due primarily to higher sales and the improvements in labor and other operating costs previously discussed.

Combined general and administrative expenses were $2.3 million during the quarter or 6.6% as a percent of total revenues. This represents a decrease of $0.3 million versus the prior year quarter due primarily to decreased professional service fees. We expect G&A costs to run approximately 7% to 7.5% of sales.

Our net income to common shareholders for the quarter was $10.6 million or income of $0.90 per share versus a net loss to common shareholders of $2.2 million or a loss of $0.17 per share in the second quarter last year.

Approximately $9.95 million of income was attributable to the release of 100% of our valuation allowance this quarter, historically going against our state and federal deferred income taxes. Adjusted EBITDA for the quarter was $1.5 million compared to $0.8 million for the second quarter of 2022.

And we finished the quarter with $5.4 million in cash and no long-term debt. Thank you. Back to you, Ryan..

Thank you, Matthew.

I'm impressed with the improvements we've made versus the prior year, in particular with Good Times where a combination of both sales and strong controls have enabled us to improve unit level economics in spite of the intense labor pressures that have been driven by a combination of market forces and regulatory action, where in the City and County of Denver, we saw a statutory minimum wage rate increase by 8% on January 1.

We expect the financial results to continue to improve on a year-over-year basis. With that, David, we'll open the call for questions..

Operator:.

We have an amazing team of leaders in our restaurants, in our multi-unit management roles and in our support center capabilities, all who are backed by an equally incredible group of team members that are all aligned with our brand's respective brand promises and to share a passion for excellence in executing their specific roles, which enable us to truly connect with and delight our guests at both brands.

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

This concludes today's conference call. You may now disconnect..