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RR

RED ROBIN GOURMET BURGERS INC (RRGB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered revenue of $285.2M on a 12-week quarter (vs 13 weeks LY), with comparable restaurant revenue up 3.4% ex-loyalty deferral and Adjusted EBITDA up 19% YoY to $12.7M, driven by appointment dining promotions, loyalty momentum, and tighter middle-of-P&L management .
  • GAAP net loss widened to $39.7M due to $32.4M impairment and closure costs and calendar headwinds; Restaurant-Level Operating Profit margin was 11.5% (down 70bps YoY) as discounting rose ~120bps .
  • 2025 guidance: revenue $1.225–$1.250B, Restaurant-Level Operating Profit 12–13%, and Adjusted EBITDA ex-SBC $60–$65M; capex $25–$30M; plan to close 10–15 restaurants and monetize 3 properties (gross proceeds $5.8M) to reduce debt and enable refinancing in 2026–27 .
  • Stock reaction catalysts: margin expansion plan primarily via labor efficiency, loyalty-driven traffic momentum into Q1, restaurant portfolio optimization, and adjusted EBITDA definition change to exclude SBC beginning 2025 .

What Went Well and What Went Wrong

What Went Well

  • Loyalty 2.0 drove engagement and frequency; total members ~14.9M by year-end with increased transactions and record sign-ups; “loyalty transactions… increased 13%” and Q4 comps accelerated through quarter-end .
  • Operational efficiency tools (hot schedules, food cost A vs T) showing traction; Q4 labor efficiency recapture implies ~$6M savings (~50bps) through first 3 quarters of 2025 if maintained .
  • Adjusted EBITDA up 19% YoY in Q4 to $12.7M despite a shorter quarter; management credits reduced selling and G&A and improved middle-of-P&L conversion from top-line momentum .

Quote: “We began to see the benefit of our work… culminating in a 600-basis point improvement in traffic trends from the first quarter… and a 19.0% increase in adjusted EBITDA” — G.J. Hart .

What Went Wrong

  • GAAP net loss widened to $39.7M from $13.7M LY, primarily from $32.4M impairment and closure costs tied to ~70 underperforming locations under review .
  • Restaurant-Level Operating Profit margin fell to 11.5% (down 70bps YoY), pressured by lower guest counts and higher discount levels (~+120bps YoY) .
  • FY 2024 Adjusted EBITDA down to $38.8M from $68.9M LY as traffic declines and promotions weighed; prior-year included 53 weeks and sale-leaseback gains .

Financial Results

Summary financials vs prior year and prior quarter

MetricQ4 2023Q3 2024Q4 2024
Total revenues ($USD Millions)$309.0 $274.6 $285.2
Net income (loss) ($USD Millions)$(13.7) $(18.9) $(39.7)
Diluted EPS (GAAP) ($)$(0.87) $(1.20) $(2.48)
Adjusted EPS (Non-GAAP) ($)$(0.66) $(1.13) $(0.94)
Restaurant-Level Operating Profit ($USD Millions)$36.8 $24.2 $32.2
Restaurant-Level Operating Profit Margin (%)12.2% 9.0% 11.5%
Adjusted EBITDA ($USD Millions)$10.6 $2.1 $12.7

Notes:

  • Q4 2024 includes 12 operating weeks vs 13 in Q4 2023; calendar shift impacted revenue and EBITDA vs LY .
  • Q4 net loss includes $32.4M impairment and closure costs .

Revenue breakdown

Revenue line ($USD Millions)Q4 2023Q3 2024Q4 2024
Restaurant revenue$301.0 $270.6 $280.6
Franchise royalties, fees & other revenue$8.0 $4.0 (Franchise $3.0 + Other $1.0) $4.6
Total revenues$309.0 $274.6 $285.2

Comparable Restaurant Revenue components (YoY % change)

ComponentQ1 2024Q2 2024Q3 2024Q4 2024
Guest Traffic(9.4%) (6.7%) (4.3%) (3.4%)
Menu Price Increase5.4% 7.6% 7.5% 9.0%
Menu Mix(1.7%) (0.9%) (1.1%) (1.0%)
Discounts(0.6%) (0.8%) (1.4%) (1.2%)
Change in unearned loyalty revenue(0.2%) 2.2% (0.1%) (1.6%)
Total Comparable Restaurant Revenue(6.5%) 1.4% 0.6% 1.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total revenueFY 2024~$1.250B ~$1.250B Maintained
Restaurant-Level Operating ProfitFY 202411.0–11.5% ≥10.5% Lowered
Adjusted EBITDAFY 2024$40.0–$45.0M $35.0–$37.5M Lowered
Capital expendituresFY 2024$25–$30M ~$25M Tightened lower
Total revenueFY 2025N/A$1.225–$1.250B New
Restaurant-Level Operating ProfitFY 2025N/A12.0–13.0% New
Adjusted EBITDA (ex-SBC)FY 2025N/A$60–$65M New
Capital expendituresFY 2025N/A$25–$30M New
Adjusted EBITDA definitionStarting FY 2025Included SBC Excludes noncash SBC Methodology change

Earnings Call Themes & Trends

TopicQ2 2024 (Prior)Q3 2024 (Prior)Q4 2024 (Current)Trend
Loyalty/Customer dataLoyalty 2.0 relaunch; faster rewards; sign-ups up; personalization roadmap 14.5M members; segmentation/gamification; strong reactivation Momentum continued; 13% increase in loyalty transactions; personalization to deepen Strengthening adoption and monetization
Operational tools (labor/food cost)Reboot A vs T; supply chain savings; marketing efficiency tests Hot schedules relaunch; cost savings pursuit Labor efficiency gains in Q4 underpin 2025 margin expansion; streamline open/close procedures Efficiency execution accelerating
Pricing/DiscountsPrice actions to offset labor/commodities; step away from deep discounting Appointment dining stack; higher discounts in Q3 2025 incremental pricing ~1%; discounts expected elevated in H1 then normalize Moderating price; tactical promos persist
Supply chain/CommoditiesGround beef/chicken/produce inflation; vendor consolidation Continued savings; distribution renewal next year ~3% commodity basket; beef inflation offset elsewhere Stable inflation outlook; savings ongoing
Restaurant portfolio optimizationSale-leaseback in Q1; focus on underperformers ~70 underperformers drag ~215bps; plan updates Impaired majority; expect 10–15 closures in 2025; 3 property sale in Q1 Active pruning to lift margins/cash flow
MarketingEfficient digital/social/earned mix; reduced traditional Value messaging; appointment dining; loyalty-driven communication Interim leadership; 3-market balanced media test; ~$30M 2025 selling expense target Efficiency focus; ROI-driven spend
Macro/SeasonalityIndustry traffic slowdown; cautious outlook Q4 backloaded; comps improved late Oct/Nov Early Q1 start strong; weather impacted February; aiming ~+3% SSS for Q1 midpoint Early-quarter momentum; weather noise

Management Commentary

  • Strategic focus: “Two key priorities in 2025: bringing guests back… and an accelerated effort to gain efficiency in our operations and deliver growth in restaurant and corporate-level profitability” — G.J. Hart .
  • Labor and margin: “In 2025, we expect to become much more efficient with our labor costs… primary driver of our expected increase in restaurant-level operating profit” — G.J. Hart .
  • Portfolio actions: “We… expect to close 10 to 15 restaurants in total in 2025” (asset impairments recognized in Q4) — G.J. Hart .
  • Debt and liquidity: “Position ourselves to be able to refinance our debt… use a portion of our free cash flow in 2025 to repay debt… monetize owned real estate” — Todd Wilson .

Q&A Highlights

  • Pricing vs margin: Incremental 2025 pricing ~1% with focus on labor efficiencies; West Coast benchmarking drove Q4 pricing; “threading the needle” to avoid over-pricing while pursuing cost savings .
  • Discounts/mix trajectory: Discounts elevated due appointment dining; expect YoY discount increase in Q1–Q2 then normalization; attach rates (appetizers/desserts/beverages) holding up, supporting mix quality .
  • Quarter-to-date (Q1): Early Q1 strong; weather volatility; aiming midrange ~+3% SSS and ~$16M adjusted EBITDA in a 16-week quarter plus $2–$3M SBC add-back under new definition .
  • Margin drivers: “The vast majority… will come from labor” vs limited COGS benefit; commodity basket ~3% inflation with beef the main pressure .
  • Off-premise/third-party: ~15% of sales; improving algorithm placement via targeted investment; expecting improvements in 2025 .
  • Closures timing: 10–15 closures spread across 2025; 3 property sales in Q1 part of that count .

Estimates Context

  • Wall Street consensus estimates via S&P Global for Q4 2024 were unavailable at the time of request due to data access limits; therefore, beat/miss vs consensus cannot be determined. Management’s 2025 guidance (Adjusted EBITDA ex-SBC $60–$65M, Restaurant-Level Operating Profit 12–13%) implies upward trajectory in profitability that consensus models should incorporate along with the new EBITDA definition excluding SBC .

Key Takeaways for Investors

  • Sequential operating momentum: Q4 Adjusted EBITDA rebounded to $12.7M from $2.1M in Q3; Restaurant-Level margin improved to 11.5%, aided by loyalty and appointment dining .
  • FY25 margin expansion strategy: Majority of margin uplift targeted from labor efficiencies (hot schedules, process streamlining), with commodities ~3% and incremental pricing ~1% .
  • Portfolio optimization: Underperforming units impaired; plan to close 10–15 locations and sell 3 properties in Q1 to reduce cash burn (~$6M restaurant-level loss in 2024 from ~70 underperformers) and repay debt .
  • Balance sheet/liquidity: $189.5M outstanding borrowings; ~$50.7M liquidity at year-end; credit agreement amendments extended covenant flexibility and revolver expansion into early 2026, supporting refinance preparation .
  • Non-GAAP methodology change: Adjusted EBITDA will exclude SBC starting FY25; transparency note that SBC expected $9–$10M in 2025 — monitor comp to prior periods and peer definitions .
  • Marketing ROI discipline: Interim leadership testing balanced media; shifting to efficient digital/social/owned channels to drive traffic at lower cost; 2025 selling expense targeted at ~$30M .
  • Near-term trading: Watch for Q1 comps and EBITDA cadence (16-week quarter), closure execution pace, and progress on labor efficiency; narrative sensitive to loyalty-driven traffic and discount normalization .

Additional Data Points

  • Liquidity at year-end: cash & equivalents $30.7M, restricted cash $8.8M, revolver availability $20M; debt $189.5M principal .
  • FY 2024 summary: revenues $1.25B, Adjusted EBITDA $38.8M, net loss $77.5M; Restaurant-Level Operating Profit margin 10.8% .
  • Comparable traffic trend improved across 2024: traffic decline moderated from (9.4%) in Q1 to (3.4%) in Q4; menu price increase rose to 9.0% in Q4; total comps +1.8% in Q4 including deferral .