Good Times Restaurants Inc. (GTIM) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several concerns: decreased sales, increased costs, and underperformance of the Good Times concept, despite some positive aspects like improved net income and cash reserves. The Q&A highlights management's reluctance to provide forward guidance, contributing to uncertainty. Despite strategic shifts and potential future projects, the immediate outlook appears challenging, leading to a likely negative stock reaction.
Key Financial Performance
Total restaurant sales (Bad Daddy's) Decreased $0.8 million to $26.5 million for the quarter, primarily due to the closure of one restaurant, reduced customer traffic, and a negative mix shift attributable to the success of Smash Patty burgers, partially offset by menu price increases.
Same-store sales (Bad Daddy's) Decreased 1.4% for the quarter with 39 restaurants in the comp base at quarter end.
Food and beverage costs (Bad Daddy's) 30.6% for the quarter, a decrease of 60 basis points from last year's quarter, primarily due to lower purchase prices for chicken wings and potatoes, partially offset by increased ground beef costs.
Labor costs (Bad Daddy's) Increased by 50 basis points to 34.3%, primarily due to decreased labor productivity resulting from the deleveraging impact of lower sales.
Occupancy costs (Bad Daddy's) 6%, a decrease of 30 basis points from the prior year quarter, primarily due to decreases in noncash rent for locations with impaired right-of-use lease assets.
Other operating costs (Bad Daddy's) 14.7% for the quarter, an increase of 30 basis points, primarily due to increased utilities, technology-related fees, and menu printing, partially offset by decreased customer delivery fees.
Restaurant-level operating profit (Bad Daddy's) Approximately $3.8 million for the quarter or 14.4% of sales, compared to $3.9 million or 14.3% last year, due to solid cost controls.
Total restaurant sales (Good Times) Decreased approximately $0.1 million to $10.4 million for the quarter compared to the prior year third quarter.
Same-store sales (Good Times) Decreased 9% for the quarter with 27 restaurants in the comp base at quarter end.
Food and packaging costs (Good Times) 31.5% for the quarter, an increase of 100 basis points compared to last year's quarter, primarily due to higher purchase prices for ground beef and eggs, partially offset by savings in potato pricing.
Labor costs (Good Times) Increased to 34.2%, a 150 basis point increase from last year's quarter, mostly due to higher average wage rates and decreased productivity resulting from the deleveraging impact of lower sales.
Occupancy costs (Good Times) 8.6%, an increase of 40 basis points from the prior year quarter, driven by the deleveraging impact of the sales decline on fixed costs.
Other operating costs (Good Times) 14.6% for the quarter, an increase of 260 basis points, primarily due to increased technology-related fees, repair and maintenance, and restaurant smallwares and supplies.
Restaurant-level operating profit (Good Times) Decreased by $0.6 million to $1.2 million for the quarter, or 11.2% of sales, a decrease of 530 basis points versus last year, due to elevated costs throughout the P&L.
Combined general and administrative expenses $2.2 million during the quarter or 5.9% of total revenues, a decrease of 120 basis points from the prior year quarter.
Net income to common shareholders $1.5 million or $0.14 per share, compared to $1.3 million or $0.12 per share in the third quarter last year.
Adjusted EBITDA $2.2 million compared to $2.4 million for the third quarter of 2024.
Cash and long-term debt $3.1 million in cash and $2.3 million of long-term debt at the end of the quarter.
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Operating Highlights
Fried Ice Cream: Successfully implemented as a limited-time offer, becoming the most successful new product in several years based on units sold.
Colorado Native Burgers: Launching a new campaign with refreshed digital assets, digital advertising, and outdoor advertising later this month.
Bratwurst Burger and Bavarian Pretzel: Upcoming fall product promotion at Bad Daddy's featuring a guest favorite burger and a new shareable pretzel with house-made sauces.
Pricing Strategy: Increased pricing by 1% in a subset of stores to measure traffic impact before a broader rollout. Competitors have started increasing prices on non-discounted items, providing flexibility for limited price increases.
Quality Positioning: Maintaining focus on quality rather than discounting, with pricing now at parity with competitors outside of discounted offerings.
Operational Improvements: Director of Operations at Good Times made significant improvements, including closer adherence to cook-to-order, new burger builds, and better scheduling for high-revenue shifts.
Cost Management: Bad Daddy's managed food and beverage costs well despite limited menu price increases, with a focus on controlling input cost inflation.
Marketing Leadership: Hired Jason Murphy as the new marketing leader to oversee advertising, promotion strategy, and online ordering experience for both brands.
Share Repurchase Program: Repurchased 21,968 shares during the quarter but plans to reduce purchases to focus on cash accumulation for the rest of the fiscal year.
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Risk or Challenges
Market Conditions: Same-store sales at Good Times declined mid-single digits year-over-year, and Bad Daddy's experienced mid-single-digit negative comps in July, indicating challenges in maintaining customer traffic and sales.
Input Cost Inflation: Record high ground beef prices and increased costs for other ingredients like eggs and utilities are pressuring margins. Ground beef costs are expected to continue rising throughout fiscal year 2025.
Labor Costs: Labor costs increased due to higher average wage rates driven by market forces and minimum wage regulations, as well as decreased productivity from lower sales.
Competitive Pressures: Competitors are heavily discounting, which challenges Good Times' quality positioning strategy. Discounting has historically preserved sales but at the expense of margins.
Supply Chain Constraints: Tightening beef supply and other commodity uncertainties are creating challenges in cost management and forecasting.
Economic Uncertainties: Macroeconomic and political forces are clouding visibility into future commodity costs, adding uncertainty to financial planning.
Operational Challenges: Decreased labor productivity and increased operating costs, including technology fees, repair and maintenance, and restaurant supplies, are impacting profitability.
Strategic Execution Risks: Delays in developing and opening new restaurants due to weather, permitting, or other reasons could hinder growth plans.
Regulatory Hurdles: Changes in wage and tip credit regulations are increasing labor costs, particularly in Denver and Colorado.
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Guidance & Outlook
Pricing Strategy: The company increased pricing by approximately 1% in a subset of stores on August 1 and is evaluating traffic impact before implementing across the entire system. They believe they can take price without significant traffic erosion.
Marketing Campaigns: A new campaign centered around Colorado Native Burgers will launch later this month, including refreshed digital assets, new digital advertising, and an outdoor advertising campaign.
Product Promotions: Bad Daddy's will feature a fall product promotion with the return of the Bratwurst Burger and a new giant shareable Bavarian pretzel. Good Times successfully launched a Fried Ice Cream limited-time offer, which was highly successful.
Commodity Costs: Ground beef costs are expected to continue increasing throughout the remainder of fiscal year 2025 due to tightening supply. Egg costs have eased but remain above prior year levels.
Labor Costs: Labor costs are expected to remain elevated due to higher average wage rates and decreased productivity from lower sales.
General and Administrative Costs: The company expects to run between 6% and 7% general and administrative costs on a full-year basis for fiscal 2025.
Share Repurchase Program: The company expects significantly reduced share repurchases as the focus will remain on cash accumulation for the remainder of the fiscal year.
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Shareholder Return Plan
Share Repurchase Program: We repurchased 21,968 shares during the quarter under our share repurchase program. Our share repurchase program continues to be active, but we expect significantly reduced purchases as our focus will remain on cash accumulation for the remainder of the fiscal year.
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Key Q&A
Q:Are we entering a phase where the EBITDA could roughly be running $2 million, $2.2 million a quarter and maybe maintenance CapEx at $0.5 million?
A:Ryan M. Zink stated that $2.2 million for this quarter is among the highest quarters throughout the year. The company does not provide forward guidance on EBITDA. Maintenance CapEx is generally budgeted at roughly 1% of sales. The company is being more reserved on special project CapEx to accumulate cash for optionality, including debt paydown, share repurchase, or new store development in fiscal 2026.
Q:Would the investment CapEx be at the existing store level or for new builds?
A:Ryan M. Zink mentioned that the company wants to preserve optionality for new units for either concept. They also aim to finish remodels at Good Times and complete technology projects at Bad Daddy's, including replacing the legacy point-of-sale system during fiscal 2026.
Q:What is the internal investment CapEx hurdle rate or IRR for existing restaurants?
A:Ryan M. Zink explained that for new unit CapEx, the target rate of return is 20% or higher. For special project CapEx, such as the point-of-sale system replacement, there is no IRR threshold as it is required maintenance. Remodel CapEx is believed to provide a strong ROI, with some projects being necessary due to aging infrastructure.
Q:Can you elaborate on the underperformance of the Good Times concept in the third quarter?
A:Ryan M. Zink attributed the underperformance to several factors, including macroeconomic and demographic/geographic challenges. Large competitors are heavily discounting, which Good Times has avoided to preserve margins. Instead, they focus on better communicating their brand message and increasing advertising without deep discounts.
Q:Do you have a plan to accelerate share repurchases given the current share price?
A:Ryan M. Zink stated that share repurchases will continue selectively. Acceleration of repurchases is likely in fiscal 2026, possibly in the second quarter, depending on macro factors and internal forecasting.
Q:What are the special projects planned for fiscal 2026 for both concepts?
A:Ryan M. Zink identified two main projects: finalizing the remodel and signage project at Good Times and replacing the point-of-sale system at Bad Daddy's. Additionally, new unit opportunities are being considered, particularly for Bad Daddy's, as the real estate market has become more favorable.
Q:Review of Unclear Management Responses
A:Management avoided providing forward guidance on EBITDA and did not give a specific timeline for completing certain projects, such as the remodels and technology upgrades. Additionally, responses regarding the underperformance of Good Times and share repurchase plans were somewhat vague, relying on external factors and internal forecasting without concrete details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Accounting Corporate
Adams Octoberfest
Ass Margarita
Bad Ass
Bad Daddy
Beer Cheese
Bratwurst Burger
Burger pretzel
Burgers asset
CEO Director
Cheddar Sam
Cheese Whole
Colorado Native
Corporate Secretary
Cream offer
Inc Senior
Times menu
beef price
beef remainder
beverage
campaign
control
decrease basis
digit
egg
fee
guest sale
improvement
marketing
potato
product service
productivity sale
promotion
sale Bad
unit
year
GTIM Transcript
Good Times Restaurants Inc. (GTIM) Q2 2026 Earnings Call Transcript
Unknown5-9
The earnings call presents a mixed picture. Positive elements include revenue and net income growth, improved gross margin, and increased cash flow. However, significant challenges such as staffing and supply chain constraints, inflation, and delays in restaurant development temper these positives. The absence of a shareholder return plan discussion and unclear management responses in the Q&A further contribute to uncertainty. Given these factors, a neutral sentiment is appropriate, reflecting balanced positive financial performance against operational and strategic challenges.
Good Times Restaurants Inc. (GTIM) Q1 2026 Earnings Call Transcript
Unknown2-5
Despite a decrease in total revenues and same-store sales, there were improvements in cost management and operating profit margins. The company plans to address value concerns and expand offerings, but faces risks like increased competition and economic conditions. The Q&A session revealed a focus on debt reduction and potential development, but no new partnerships or guidance changes were announced. Given these mixed signals and no significant catalysts, the stock price reaction is expected to be neutral over the next two weeks.
Good Times Restaurants Inc. (GTIM) Q4 2025 Earnings Call Transcript
Unknown12-23
The earnings call revealed disappointing financial results with decreased revenues, increased costs, and a net loss. Despite some optimistic guidance for fiscal 2026, the lack of Q&A engagement and absence of a clear shareholder return plan add to uncertainty. The negative sentiment is compounded by regulatory challenges and operational cost increases, leading to a likely negative stock reaction.
Good Times Restaurants Inc. (GTIM) Q3 2025 Earnings Call Transcript
Unknown8-9
The earnings call reveals several concerns: decreased sales, increased costs, and underperformance of the Good Times concept, despite some positive aspects like improved net income and cash reserves. The Q&A highlights management's reluctance to provide forward guidance, contributing to uncertainty. Despite strategic shifts and potential future projects, the immediate outlook appears challenging, leading to a likely negative stock reaction.
GTIM Report
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