Red Robin Gourmet Burgers, Inc. (RRGB) Bundle
Understanding Red Robin Gourmet Burgers, Inc. (RRGB) Revenue Streams
Understanding Red Robin Gourmet Burgers, Inc.’s Revenue Streams
The primary source of revenue for the company is derived from the sale of food and beverages at Company-owned restaurants, along with royalties and fees from franchised restaurants. The following table illustrates the revenue breakdown for the fiscal periods ended October 6, 2024, and October 1, 2023:
| Revenue Source | Twelve Weeks Ended October 6, 2024 (in thousands) | Twelve Weeks Ended October 1, 2023 (in thousands) | Percent Change |
|---|---|---|---|
| Restaurant Revenue | $270,605 | $273,133 | (0.9)% |
| Franchise Revenue | $3,007 | $3,418 | (12.0)% |
| Other Revenue | $1,026 | $1,009 | 1.7% |
| Total Revenues | $274,638 | $277,560 | (1.1)% |
For the year-to-date period, the revenue analysis is as follows:
| Revenue Source | Forty Weeks Ended October 6, 2024 (in thousands) | Forty Weeks Ended October 1, 2023 (in thousands) | Percent Change |
|---|---|---|---|
| Restaurant Revenue | $943,630 | $973,307 | (3.0)% |
| Franchise Revenue | $12,635 | $12,245 | 3.2% |
| Other Revenue | $7,068 | $8,468 | (16.5)% |
| Total Revenues | $963,333 | $994,020 | (3.1)% |
Year-over-year revenue growth indicates a decline in overall revenue, primarily attributed to a decrease in restaurant revenue. The significant changes in revenue streams are highlighted as follows:
- Restaurant Revenue: Decreased by $29.7 million or 3.0% year-to-date compared to the same period in 2023.
- Franchise Revenue: Decreased by $0.4 million or 12.0% in the third quarter compared to the same period last year.
- Other Revenue: Decreased by $1.4 million in both the third quarter and year-to-date periods of fiscal 2024 compared to 2023.
Average weekly net sales volumes in Company-owned restaurants for the fiscal year are as follows:
| Period | Average Weekly Net Sales (in thousands) |
|---|---|
| Twelve Weeks Ended October 6, 2024 | $55,007 |
| Twelve Weeks Ended October 1, 2023 | $54,572 |
| Forty Weeks Ended October 6, 2024 | $57,261 |
| Forty Weeks Ended October 1, 2023 | $58,446 |
Overall, the revenue analysis reveals a trend of declining total revenues, with restaurant revenue being the most impacted segment. This decline has been compounded by a decrease in guest count and the closure of several restaurant locations, leading to a reevaluation of the company's operational strategies moving forward.
A Deep Dive into Red Robin Gourmet Burgers, Inc. (RRGB) Profitability
A Deep Dive into Red Robin Gourmet Burgers, Inc. Profitability
Gross Profit Margin: For the twelve weeks ended October 6, 2024, the gross profit margin was approximately 9.0%, compared to 11.1% for the same period in 2023. For the forty weeks ended October 6, 2024, the gross profit margin was 10.6%, down from 13.1% in the previous year.
Operating Profit Margin: The income (loss) from operations for the twelve weeks ended October 6, 2024, was $(12,877) thousand, representing an operating profit margin of (4.7%). For the forty weeks ended October 6, 2024, the loss from operations was $(19,551) thousand, equating to an operating profit margin of (2.0%).
Net Profit Margin: The net loss for the twelve weeks ended October 6, 2024, was $(18,876) thousand, reflecting a net profit margin of (6.9%). For the year-to-date period, the net loss was $(37,825) thousand, resulting in a net profit margin of (3.9%).
Trends in Profitability Over Time
Comparative analysis shows a concerning trend in profitability metrics. The gross profit margin has decreased significantly from 11.1% in Q3 2023 to 9.0% in Q3 2024. This trend continues in the annual comparison, with the forty-week gross margin dropping from 13.1% to 10.6%.
Comparison of Profitability Ratios with Industry Averages
Industry averages for restaurant companies typically reflect gross profit margins around 25%. The current gross profit margin of 9.0% indicates substantial underperformance relative to industry benchmarks.
Analysis of Operational Efficiency
Cost Management: The cost of sales for the twelve weeks ended October 6, 2024, was $65,105 thousand, which is consistent with $65,128 thousand in the prior year. However, as a percentage of restaurant revenue, the cost of sales stands at 24.1%, up from 23.8%.
Labor Costs: Labor costs increased to $107,692 thousand for the twelve weeks ended October 6, 2024, compared to $103,741 thousand in the same period last year. This represents 39.8% of restaurant revenue, an increase from 38.0%.
Other Operating Costs: For the twelve weeks ended October 6, 2024, other operating costs were $49,740 thousand, showing a slight decrease from $50,351 thousand in the prior year, maintaining a ratio of 18.4% of restaurant revenue.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | 9.0% | 11.1% | (2.1%) |
| Operating Profit Margin | (4.7%) | (0.7%) | (4.0%) |
| Net Profit Margin | (6.9%) | (2.9%) | (4.0%) |
| Cost of Sales (% of Revenue) | 24.1% | 23.8% | 0.3% |
| Labor Costs (% of Revenue) | 39.8% | 38.0% | 1.8% |
Overall, the analysis of profitability metrics reveals a challenging financial landscape, characterized by declining margins and increasing operating costs, which necessitate strategic interventions for improvement.
Debt vs. Equity: How Red Robin Gourmet Burgers, Inc. (RRGB) Finances Its Growth
Debt vs. Equity: How Red Robin Gourmet Burgers, Inc. Finances Its Growth
As of October 6, 2024, the company reported total liabilities of $722.8 million, which includes both long-term and short-term debt. The breakdown of the debt includes:
| Type of Debt | Amount (in millions) |
|---|---|
| Long-term Debt | $540.0 |
| Short-term Debt | $180.7 |
The company's debt-to-equity ratio stands at approximately 13.5, significantly above the industry average of around 1.0. This indicates a heavy reliance on debt financing compared to equity. The high ratio suggests that the company is primarily funded through debt, which could pose risks if not managed properly.
Recent debt activity includes the following:
- In fiscal 2024, the company recorded interest expense of $18.9 million, down from $20.4 million in fiscal 2023.
- The weighted average interest rate on the company's debt increased to 13.3% in fiscal 2024 from 12.6% in fiscal 2023.
- As of October 6, 2024, the company has outstanding borrowings of $180.7 million under its credit facility, including $20 million drawn on its revolving line of credit.
The company has taken steps to balance its financing through a mix of debt and equity. In the past year, it has utilized proceeds from sale-leaseback transactions to pay down debt, indicating a strategy to reduce leverage while maintaining operational flexibility.
In light of its financial structure, the company recently amended its Credit Agreement, which has resulted in:
- Increased revolving commitments to $40 million through the first quarter of fiscal 2026.
- Amendments to financial covenants, allowing for a higher maximum net total leverage ratio.
Overall, the company's strategy reflects a careful balance between leveraging debt for growth and ensuring sufficient equity funding to support operations and manage risk effectively.
Assessing Red Robin Gourmet Burgers, Inc. (RRGB) Liquidity
Assessing Red Robin Gourmet Burgers, Inc.'s Liquidity
Current Ratio: As of October 6, 2024, the current ratio stands at 0.73, reflecting a decrease from the previous year.
Quick Ratio: The quick ratio is calculated at 0.58, indicating potential liquidity challenges as it is below the ideal threshold of 1.0.
Analysis of Working Capital Trends
As of October 6, 2024, working capital is reported at ($113.2 million), down from ($75.4 million) at the end of 2023, indicating a worsening liquidity position.
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| October 6, 2024 | 30,300 | 143,500 | (113,200) |
| December 31, 2023 | 31,600 | 107,000 | (75,400) |
Cash Flow Statements Overview
Operating Cash Flow: For the forty weeks ended October 6, 2024, net cash provided by operating activities is $1.8 million, a significant decline from $17.4 million in the prior year.
Investing Cash Flow: Net cash provided by investing activities decreased to $4.9 million for the same period, down from $19 million year-over-year.
Financing Cash Flow: Cash used in financing activities was ($8 million), compared to ($33.7 million) in the previous year.
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | 1,840 | 17,361 |
| Investing Activities | 4,873 | 18,992 |
| Financing Activities | (7,990) | (33,741) |
Potential Liquidity Concerns or Strengths
The company holds approximately $30.3 million in cash and cash equivalents as of October 6, 2024. However, with total liabilities reported at $669.4 million and a net loss of $37.8 million for the year-to-date, liquidity concerns are heightened.
Outstanding borrowings under the Credit Facility are $180.7 million, including $20 million drawn on its revolving line of credit .
Is Red Robin Gourmet Burgers, Inc. (RRGB) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether the company is overvalued or undervalued, we can analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated using the latest available earnings per share (EPS) of ($2.42), reflecting a negative earnings scenario. The stock price as of the latest report is approximately $8.00. Thus, the P/E ratio is not applicable due to negative earnings.
Price-to-Book (P/B) Ratio
The book value per share is derived from total stockholders' equity, which stands at ($53,337,000) as of October 6, 2024. The number of shares outstanding is 20,449,000. Therefore, the book value per share is approximately ($2.61), resulting in a P/B ratio that is also not applicable.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of October 6, 2024, the enterprise value (EV) is calculated as total debt plus market capitalization minus cash. Total debt is $180.7 million, and the market capitalization is calculated using the stock price of $8.00 multiplied by shares outstanding, resulting in approximately $163.6 million. Therefore, EV is approximately $324.3 million. The EBITDA for the period is reported as $25.6 million, leading to an EV/EBITDA ratio of approximately 12.67.
Stock Price Trends
Over the last 12 months, the stock price has shown significant volatility:
- 12 months ago: $25.00
- 6 months ago: $12.00
- Current price: $8.00
This indicates a decline of approximately 68% over the last year.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio is not applicable due to the absence of dividend payments.
Analyst Consensus on Stock Valuation
As of the latest analyst ratings:
- Buy: 0
- Hold: 2
- Sell: 5
The consensus indicates a bearish outlook, suggesting caution for potential investors.
| Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | N/A |
| EV/EBITDA | 12.67 |
| Current Stock Price | $8.00 |
| 12-Month Price Change | -68% |
| Dividend Yield | 0% |
| Analyst Consensus (Buy/Hold/Sell) | 0/2/5 |
Key Risks Facing Red Robin Gourmet Burgers, Inc. (RRGB)
Key Risks Facing Red Robin Gourmet Burgers, Inc.
Red Robin Gourmet Burgers, Inc. faces several internal and external risks that significantly impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The competitive landscape within the casual dining industry is intense, with numerous players vying for market share. As of the third quarter of fiscal 2024, total revenues decreased by $2.9 million year-over-year, highlighting pressure from competitors.
Regulatory Changes
The company is subject to various federal, state, and local regulations, including health and safety standards. Changes in these regulations can lead to increased operational costs. For instance, the effective tax rate for the third quarter of fiscal 2024 was 0.5% compared to 3.5% in the previous year.
Market Conditions
Market conditions such as economic downturns or changes in consumer preferences can adversely affect sales. In fiscal 2024, restaurant revenue decreased 3.0% from the previous year. This decline was primarily due to a 6.5% decrease in guest count.
Operational Risks
Operationally, the company has faced challenges related to restaurant closures. Nine locations were closed after October 1, 2023, which contributed to the decline in restaurant revenue. The company reported a net loss of $18.9 million in the third quarter of fiscal 2024, compared to a net loss of $8.2 million in the same period last year.
Financial Risks
Financial risks include high levels of debt and interest expenses. As of October 6, 2024, the company had outstanding borrowings of $180.7 million under its credit facility. Interest expense for the third quarter was $6.3 million, reflecting an increase in the weighted average interest rate to 14.0%.
Strategic Risks
Strategically, the company has been adjusting its financial covenants. Recent amendments to the credit agreement have increased the maximum net total leverage ratio, providing some flexibility but also indicating potential financial strain.
Mitigation Strategies
To address these risks, the company has implemented various strategies including adjusting its loyalty program, which has grown to 14.5 million members as of the third quarter of fiscal 2024. Additionally, the execution of a sale-leaseback transaction generated net proceeds of approximately $23.3 million, which has been crucial for managing liquidity.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition in casual dining sector | Total revenues decreased by $2.9 million |
| Regulatory Changes | Compliance with federal and state regulations | Effective tax rate of 0.5% |
| Market Conditions | Economic fluctuations affect consumer behavior | Restaurant revenue down 3.0% |
| Operational Risks | Closure of nine restaurant locations | Net loss of $18.9 million |
| Financial Risks | High debt levels and interest expenses | Outstanding debt of $180.7 million |
| Strategic Risks | Adjustments to credit agreement covenants | Increased leverage ratios |
| Mitigation Strategies | Enhancements in loyalty program and sale-leaseback transactions | Generated $23.3 million |
Future Growth Prospects for Red Robin Gourmet Burgers, Inc. (RRGB)
Future Growth Prospects for Red Robin Gourmet Burgers, Inc.
Analysis of Key Growth Drivers
Red Robin Gourmet Burgers, Inc. is focusing on various growth drivers including product innovations, market expansions, and strategic partnerships. The company operates 500 locations across North America, consisting of 408 company-owned and 92 franchised restaurants as of October 6, 2024 .
Product Innovations
The company has been investing in menu enhancements, evidenced by a 7.5% increase in menu prices, contributing to a 4.4% increase in average guest checks . The relaunch of the loyalty program has bolstered membership to 14.5 million, up from 13.1 million .
Market Expansions
While no new restaurants were opened in the year to date period of fiscal 2024, the company completed the rollout of 25 Donatos® locations in fiscal 2023, indicating potential for future expansions . The company has also executed a sale-leaseback transaction for ten restaurants, raising approximately $23.3 million .
Future Revenue Growth Projections and Earnings Estimates
For fiscal 2024, total revenues are projected to be $963.3 million, a decline of $30.7 million compared to the previous year . The net loss reported for the year to date period is $37.8 million, compared to a $7.5 million loss in the prior year . Adjusted EBITDA is estimated at $26.1 million, down from $58.3 million last year .
Strategic Initiatives and Partnerships
The company has an ongoing amendment to its credit agreement, extending adjustments to financial covenants and expanding revolver capacity through the first quarter of fiscal 2026 . This is expected to enhance financial flexibility and support operational initiatives.
Competitive Advantages
Red Robin maintains a competitive edge through its brand recognition, extensive menu offerings, and a strong loyalty program. The average weekly net sales volumes in company-owned restaurants stood at $55,007, reflecting a 0.8% increase year-over-year . The company’s focus on dine-in experiences, which comprise 76.5% of total food and beverage sales, further positions it favorably against competitors .
| Metric | Fiscal 2023 | Fiscal 2024 | Change |
|---|---|---|---|
| Total Revenues | $994.0 million | $963.3 million | (3.1%) |
| Net Loss | $7.5 million | $37.8 million | (404.0%) |
| Adjusted EBITDA | $58.3 million | $26.1 million | (55.2%) |
| Average Weekly Net Sales | $54,572 | $55,007 | (0.8%) |
| Loyalty Program Members | 13.1 million | 14.5 million | 10.7% |
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Updated on 16 Nov 2024
Resources:
- Red Robin Gourmet Burgers, Inc. (RRGB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Red Robin Gourmet Burgers, Inc. (RRGB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Red Robin Gourmet Burgers, Inc. (RRGB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.