Good day and welcome to the BJ's Restaurants Incorporated Second Quarter 2017 Earnings Release Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Greg Trojan, President and Chief Executive Officer. Please go ahead.

Thank you, operator. Good afternoon, everyone and welcome to BJ's Restaurants fiscal 2017 second quarter investor conference call and webcast. I'm Greg Trojan, BJ's Chief Executive Officer and joining me on the call today is Greg Levin, our Chief Financial Officer. We also have Greg Lynds, our Chief Development Officer; and Kevin Mayer, our Chief Marketing Officer on hand for Q&A. After the market closed today we released our financial results for the second quarter of fiscal 2017, which ended Tuesday, July 4. You can view the full text of our earnings release on our website at www.bjsrestaurant.com. Our agenda today will start with Rana Schirmer, our Director of SEC Reporting providing our standard cautionary disclosure with respect to forward-looking statements. I will then provide an update on our business and current initiatives and then Greg Levin will provide a recap of the quarter and some commentary regarding the remainder of fiscal 2017 and after that we'll open it up to questions. So, Rana, go ahead, please.

Thanks, Greg. Our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Investors are cautioned that forward-looking statements are not guaranteed the future performance and that undue reliance should not be placed on such statements. Our forward-looking statements speak only as of today's date, July 27, 2017. We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise unless required to do so by the securities laws. Investors are referred to full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission.

Thanks, Rana. At the time of our first quarter earnings call in late April, we discussed that the second quarter is off to a solid start with comparable restaurant sales slightly positive. However, beginning in mid-May our sales softened as we noted in today's press release. Ultimately, the headwinds in the general retail and restaurant categories we've previously discussed resulted in comparable restaurant sales of negative 1.4% for the quarter. While we are disappointed with these short-term results, we made important progress during the quarter in moving BJ's forward and continued to see initial encouraging signs from these medium to longer term sales building initiatives. Specifically, the roll out of our new slow roast cooking platform and menu additions, our new server hand-held devices, training for our new takeout and delivery offerings and new lineup of weekday Brewhouse specials are all off to good starts and our confidence remains high on the return we expect to generate from these investments. For example, the new slow roasted menu items are boosting average check, while the hand-held rollout completed ahead of schedule has already improved the time it takes for food and beverage to arrive at our table and has increased sales. Notwithstanding the benefits we are starting to see, our rollout of these programs impacted our margin performance and also our shorter term guest traffic in the quarter. We indicated on the Q1 call that we anticipated short-term impacts from these initiatives and in a moment Greg Levin will provide more details where we saw pressure on food and labor cost during the quarter. However, besides the cost of additional training, food sampling and our overall learning curve inefficiencies, the concerted and comprehensive level of activity our operators undertook in such a short amount of time likely came at a cost…

Hi. Thanks, Greg. As Greg Trojan mentioned for the quarter, our revenues increased 6.2% to $265.8 million. Our sales increase reflects a 9.7% increase in total operating weeks and that's partially offset by a decrease in our weekly sales average of about 3.2% or so. Our comparable restaurant sales decreased 1.4% for the quarter compared to a negative 0.2% in last year's second quarter. As we noted in today's press release, we started the quarter with solid sales and finished April with positive comparable restaurant sales. However, the trends in mid-May softened and continued through June. From a geographic standpoint, the softening trend was pretty widespread and was not the result of one region or geography. During the quarter our comparable restaurant sales were comprised of approximately 2.8% of average check growth consisting of menu pricing of about 3% while traffic was down about 4% for the quarter. Cost of sales for the quarter were pretty much in line with our expectations at 26.2%, or about 120 basis points higher than the year-ago quarter. The increase from the prior year was primarily due to increases in commodity costs, menu mix related to the new slow roasted items and daily Brewhouse Specials and higher discounting from a year ago. As we mentioned on the last call, our new slow roasting items generally have a higher cost of sales percentage but generate more gross profit dollars to offset labor and operating and occupancy costs. For the quarter we have seen some continued pressure in seafood and produce primarily avocados resulting in an increase in our commodity basket of around 1.8% or so quarter-over-quarter from the prior year. Labor of 35.4% for the second quarter represented 110 basis point increase from the year-ago period. The majority of the increase was due to higher…

We'll go first to Will Slabaugh with Stephens.

Yes. Thanks, guys. Wondering if you could expand on the comment you made around things softening in mid-May and into June. Is there any other sort of macro data points you could point us to or any other sort of color just around what you saw either in mall-based properties or other restaurants that happened once we got into that period?

Yes. Looking at the data and taking a close look at it maybe versus April let's say and even March where the trends were, I think we saw more of a softening in the middle part of the week around lunch and middle week overall in regards to kind of the comp sales. But it didn't seem very geographic specific as I mentioned in our formal remarks in that regard. As Greg Trojan mentioned and we kind of mentioned a little bit on the call, I think with the slow roasted items that tend to have a little bit more of a weekend plan to them that helped drive that part of our business, getting a little bit greater average check growth from that. I would say if you look at the business year-over-year, we probably were a little bit more lunch marketing last year but that was all through the first and second quarter of last year with our Piadinas and some lunch promotion. And by the way, that did go through like end of Q1 last year into all of Q2. So it was interesting to see it kind of happen mid-May. There was obviously a little bit of a calendar shift. That mother's day moved to week two of May this year versus week one of last year. We also had Cinco de Mayo move to a Friday but all that's kind of at the first part of May. So our only conclusion looking at it was not mall versus free-standing dependent but really more of a slowdown in the Monday through Thursday traffic. Lunch seemed to be a little bit slower than dinner.

Got it. Thanks for that. And as far as the color you give quarter to-date, which we always appreciate, it looks like your comparison gets easier throughout the quarter. So I don't know if you could remember the commentary maybe from last year around if it eases sort of as the quarter goes along or if maybe there's a month that's easier if there were some shifts maybe that caused that comparison to ease last year.

Yes. Last year I think really September for us, which we called that out specifically on the call, was a very soft month for us. Some of the things we saw last year specifically, which I think is beneficial for us in that regards is you did have the Olympics that were in prime time here on the West Coast. You had the political events going on last year, whether it was the conventions, which seemed to play a little bit more on the West Coast as well. And as a result it does get easier from a year-over-year comparisons going through the quarter. But specifically for last year, September was a real challenging quarter for us and was the softest of the period and we generally don't comment on individual comp sales period-by-period but we did mention that last year we saw a softness in September that kind of drove the overall Q3 of 2016.

Got it. And one more quick one if I could. Just curious on the last few weeks and not to read too much into just a couple weeks of data, but I think they've been getting just a little bit better. Does it feel like the consumer is acting more "normal" a little bit less week-to-week and day-to-day volatility or there's anything else to call out there?

It's tough to say in a matter of a few weeks, Will. What we know is helping a bit is remember if all the sales initiatives we're working on here, time is our friend as they really are in place to impact the business. If you think about Q2, really the one that was more in place than not was the introduction of the slow roast products, which were very successful in terms of driving check, right. But all the other ones are really just getting to a point where they should be impacting the top line. So it's certainly our hope. It's tough to control what the consumer is doing so we can more control that we're executing those initiatives well and having them start impacting the top line more significantly than they did in Q2.

Great. Thanks, guys.

You're welcome.

We'll go next to Brian Bittner with Oppenheimer & Company. Michael Tamas - Oppenheimer & Co., Inc.: Hi. Thanks. It's Mike Tamas on for Brian. Just wonder if we could talk about all the sales building initiatives that you're doing. When do we get to see some of the profit flow through from that? In other words, the training costs, are those constrained to the third quarter? Will we get to see some benefit in the fourth quarter? Does that kind of get pushed to 2018?

Mike, I'll take some of that. I think Greg will talk to it as well. As we kind of mentioned in today's call, we rolled out a lot here in the second quarter. And, obviously, as we mentioned, that makes it always challenging in regards to leveraging that part of your business when you're training things like handhelds, you're training the slow roasted items, et cetera, from that standpoint and as we're rolling out the delivery and training all of our team members. The majority of that is behind us now. So it should start to flow through really in getting into Q3 and really into Q4. But, frankly, at the end of the day, we want to make sure we're executing at the highest level so when guests come in, they have a great experience. But you've got to train and you've got to put those things in place. As much as we'd all love it to work on a one-for-one basis, it sometimes doesn't work that way. And that's why we always talk about these being investments into our business. But ultimately, things like the slow roasted oven are in place now. We've gone through that training and will continue to get better and better on it. We still got a little bit of a handheld to go. But the things that we're seeing on our pace (33:05) score is coming from our NPS, from our Net Promoter Scores, all look better from there and we should start to adjust from that. So I think mostly, as we start to get into Q4, we'll be able to leverage those things better than where we were in Q2. Frankly, even better than where we are in Q3. Like anything, you get your sea legs over time and we're getting our sea legs there. But these are investments that we are making into our business to drive the long-term sustainability of BJ's. And, frankly, nobody out there can do prime rib and what we call large format proteins like we can. That really differentiates us and puts us, I believe, in a different level going forward.

Mike, the only thing I'd add to that is I don't know if the underlying your question is are you – we want to make sure it happens, that these actually are successful from a top line perspective. But when they are, they will drive incremental profitability. There's not a margin overriding concern in my mind on any one of these initiatives. Some of them add margins, like slow roast should help us leverage and some are lower. But incrementally, if they're driving top line, given our cost structure, we'll leverage the fixed cost in our business. And if they produce the sales, we'll flow through the profit. Michael Tamas - Oppenheimer & Co., Inc.: Awesome. Thanks. And then just really quick just a clarification. You said that the comps quarter to-date, excluding some of the first week negativity, would have been down 1% and it's actually down 1.7%? Is that right? So 70 basis points?

That's correct. Michael Tamas - Oppenheimer & Co., Inc.: All right. Thanks very much, guys.

You're welcome.

You're welcome.

We'll go next to John Glass with Morgan Stanley.

Hi. This is actually Brian (34:45) on for John. Just a quick question. You had mentioned that pricing was 3% but ticket was only 2.8%. So, I mean, you had talked about how the slow roasting was mixing in more. Can you just talk about the dynamic that's driving that negative mix with slow roasting come online?

Yeah. No, that's a great question because there were some bigger moves than normally on check. So it's worth understanding. Keep in mind before we get to some more of the details, the strategy behind balancing of these initiatives is to take the advantage of check growth on slow roast and invest some of that back into our Brewhouse Specials and (35:40) to be more promotional as we see fit. And that's really what happened in the quarter is – as I look at it we really had net pricing of a little over 1% and the increase in discounting and Brewhouse Specials took us down from that nominal pricing level of about a little over 3% to the a little over the 1% range. And then slow roast and some of the other menu work that we've done around beverages and size had a very meaningful upside to that number to help in effect subsidize some of the investments in value there.

Got you. Okay. Thank you. And then, I guess, two things. First, kind of you had mentioned that you were trying to maybe switch the messaging away from the premium so that you're not scaring away that traffic. How are you going to change that messaging moving into the 3Q to kind of promote some of that traffic coming back?

I wouldn't really describe it as switch. What I was just trying to point out there, Mike (36:51), is look, we've launched a whole important new platform that we think is really significant from a differentiation perspective and it made sense to talk about that, right. And listen, given our limited marketing resources from a dollar perspective is we've got to stay pretty much on message the bigger news of the quarter, right, and that was really these new slow roast items. And even though a lot of our messaging had a promotion attached to it, it's just not the same. It's not as effective in our mind in terms of having a lower priced item attached where the deal really signals value. And at the extreme, we're talking about prime rib, which gets really high value scores but nonetheless it's a significantly higher price point for us. Even though there's a deal attached to it, it's not screaming value to that price point sensitive guest the same way as an $8.95 Piadina plus a $10 off $35 coupons together is at the end of the day a more powerful overall value message. So it's not a sea change for us. It was frankly, these slow roasted items, I wouldn't say that they sell themselves, but we're very encouraged the mix that we're seeing there. And as we move to I would say more of the traditional combination of value messaging of product and price point and deal that that will help us attract that more value conscious consumer at the end of the day.

All right. Thanks. And then just last one real quick. You've given in the past what percentage of your sales are on discount. Would you be willing to give that?

I think for the quarter we were somewhere around 10% or 11% of check that had a discount on them or had a deal on them. I don't have that in front of me, but I think that's what the number was.

That's right.

All right. Perfect. Thanks very much.

Okay.

We'll go next to Jeff Farmer with Wells Fargo.

Thanks. Good afternoon, guys. Greg, I think you said you had seen roughly 4.5% wage rate inflation in the quarter. I think that's a – couple of quarters you've seen that level of wage rate inflation. Any reason to expect that that might moderate as you move into 2018 and get a little relief from that?

I think, Jeff, it's a great question. By the way, nice article on the wage rate inflation that you wrote as well. As I think about going into 2018 versus where we are this year, a lot of it's still being driven by the kitchen and not necessarily entirely minimum wage from that standpoint. However, you do get the compression as minimum wage hits higher numbers, the people in kitchen or non-tip positions want to see some of that increase, and that's what we're experiencing. As I think we go into next year, I think it will come down a little bit. We're not seeing quite as large of an increase in certain areas as we saw beginning in this year with some of the big hits, but I still think wage inflation is going to be challenging within the industry until restaurants overall maybe slow down growth a little bit. And I'm not sure we're entirely seeing that. I think we are in certain areas but I still see a lot of new restaurants coming on the pipeline, especially more kind of maybe independents that have unbridled enthusiasm towards what their business can do.

Okay. And then it looks like your debt level did fall a little bit in the quarter. But your leverage ratio looks like it was roughly flat, but still near a peak level. Just curious how should we be thinking about your leverage moving forward or your willingness to use the balance sheet to potentially pursue share repurchase with the share price at this level?

I think there's a couple things out there, Jeff. One is, as we look towards the back half of this year, we've gotten through most of our major sales-building initiatives that were probably more capital-intensive on our business, whether it's the slow roasted ovens or the handheld devices. We have three more restaurants to build this year, and as we continue to evaluate our pipeline for next year, I tend to think that we're going to be generating more cash in the second half and going into next year. That gives us more flexibility to go out and buy back shares, if necessary, if we think that's the right call for our business. So I think we have some flexibility there. We're at somewhere in the neighborhood of 1.5 times or so on a debt-to-EBITDA standpoint. And I still think there's flexibility there, especially knowing that we're going to be generating cash in our business in the second half. So we'll continue to be opportunistic as we think the timing's right.

All right. Thank you.

You're welcome.

We'll go next to Matt DiFrisco with Guggenheim Securities.

Hey, guys. Thanks for taking my call. This is Jake on for Matt. Just a quick one. I don't know if you'd be able to quantify kind of the playoff from this quarter as opposed to same quarter last year with San Jose missing the playoffs and then two less NBA finals games. And then a quick follow-up.

That's tough for us to do. I mean being an NBA fan in particular, I think until the finals, in general, there was a lot less suspense and enthusiasm through the series with so many sweeps. We would like to have seen more engaging series leading up to the finals for sure.

The other thing, Jake, and you mentioned San Jose. I gather you're a hockey fan, like Matt, your partner there, from that standpoint. I do know our operators complained about it that work in the Northern California area, basically said last year we had the Sharks going further, et cetera. And that really helped us. We don't have it quantified though.

Okay. Great. Thanks for that. And then just lastly real quick. If you could kind of provide some color on the pace of your roll-out for delivery. Does it almost become exponential in the next few years? Or are you guys going to take a more methodical approach to it?

Well, look, the good news is we've been working on this for quite some time and the marketing of our newfound delivery capability in a lot of our restaurants is just getting started, right. So we're in, Greg, I think just a little over 100 restaurants with some form of delivery capability at this point. So the growth is going to come from A, marketing that capability and over time creating awareness around our ability to deliver. And also, by the way, we think just as large an opportunity is to tell people about our compelling carry out and big catering large takeout business. So it's not just delivery but in both of those cases it's a matter of building awareness, trials just like the rest of our businesses, and with our menu and breadth of our menu, we think we're really well-positioned. So it's both, so it's sort of like the development pipeline is new unit growth in terms of getting more restaurants online and through the expansion of our third-party delivery partners, that will happen, so we'll be closer to our full network over time given that we're only at 100 restaurants right now. But really the most important growth is on a comp sales perspective per restaurant as we market our capabilities there and with our partners execute well, we think those sales will continue to grow for several years. I mean we're not going to make up a gap between 5% to 10% in six months. But we think it can start to be a meaningful driver of comp sales for us as we go across that and shorten the gap between us and the industry there.

Okay. Great. Thank you, guys.

Thank you.

And we'll go next to Mary McNellis with Robert W. Baird. Mary L. McNellis - Robert W. Baird & Co., Inc.: Hi. Good afternoon. Thanks for taking the question. Just coming back to the trends you've seen here in early Q3, do you have any sense of whether the improvement you've seen in the last two weeks or so has been driven by something company specific, perhaps some of the benefits of your sales drive and initiatives starting to inflect or whether the industry has been seeing a similar trend as well?

The only thing I can tell you is we are seeing a change versus our comparisons to the industry in the last few weeks so, look, it's only a couple weeks. So we are hesitant to draw any conclusions there, but there are some indications that it's our initiatives given our performance relative to the industry. Mary L. McNellis - Robert W. Baird & Co., Inc.: That's helpful. Thank you. And just one quick follow-up. When you think about all the initiatives, the slow roast ovens, server handheld value, off-premise, which of those do you think is going to be most impactful as you sort of drive back towards flat traffic moving forward and as you kind of stack those up, which do you think will be most important?

That's strategically doing different things. So it's a difficult question to answer. And it's also relative to the timeframe of if you're talking about a couple of years or the next six months, but in general I'll comment on a few of them. Just one reminder again is in terms of those weapons helping drive sales, really slow roast is the only one that was fully engaged, if you will, right. So, I think if you just really look at the numbers of the industry on a pure quantitative basis, it's the off-premise part of the business. If you look at it from a guest satisfaction what's going to make the biggest difference, you could argue our handheld and speed of service is going to have the biggest impact because our fundamental – I think consumers have less patience than ever before, less time during lunch. And if we can close that gap and make a dining experience at BJ's speedier and we know already it's helping our guest scores, over time that could be as impactful if not more. I mean, it's tough to say. But if you just look at the gap of channel, the channel opportunity we have in off-premise, that's probably the easiest to quantify and would result in the largest number. Mary L. McNellis - Robert W. Baird & Co., Inc.: Okay. That's helpful. Thank you very much.

Okay.

And we'll take our last question from Brian Bittner with Oppenheimer & Company. Michael Tamas - Oppenheimer & Co., Inc.: Hey, guys. Thanks for the follow up. Just a quick question on the gap from average weekly sales to same-store sales. I think it was about 1.8%, which is fairly consistent with what the first quarter was, but I thought it was supposed to kind of get better from here. So I was just wondering any thoughts on that? Is there anything to read into that? And how do you think that trends in the back half of the year?

Yeah. Great question. I was myself a little surprised on that and what I realized as we look at the data is, our quarter this year ended on Tuesday, July 4. So you had that July 4 week in there versus last year it ended on Tuesday, July 8, and what I ended up noticing looking at the difference between those two weeks through July 4th week is a slow week for us. People do barbecues, they go to the beach, they go on vacation and that's worth about 30 to 40 basis points in our weekly sales average. So your 1.8% would compress probably down to 1.4% or 1.5% in that regard. Still a little bit higher than where I was expecting in that regard, but that was the big difference on it. It was really the fact that we ended July 4 versus June 28 a year ago. Michael Tamas - Oppenheimer & Co., Inc.: Got you. Okay. And so for the rest of the year you think it's probably more normal than 1 8%-ish, right.

Yeah. I really do. Michael Tamas - Oppenheimer & Co., Inc.: Okay. Perfect. Thanks, guys. Appreciate it.

You're welcome.

That concludes our question-and-answer session. And that concludes our call for today. Thank you for your participation.

Thank you, everyone.