Red Robin Gourmet Burgers, Inc. (RRGB) Q3 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Red Robin Gourmet Burgers, Incorporated Third Quarter 2015 Earnings Call. Today's call is being recorded. As a reminder, part of today's discussion will include forward-looking statements within the meaning of federal securities laws. These statements are commonly identified by words such as anticipate, continue, plan, expect, intend, should, will, and other terms of similar meaning. These statements include, but will not be limited to statements that reflect the company's current expectations with respect to the macroeconomic and competitive environment, the financial condition of the company, results of operation, strategy, objectives, and future performance, including the company's traffic and revenue-driving initiatives, sales growth, operating margin and operating weeks, costs, expenses, expense management, deployment of capital, restaurant development and remodel, performance of remodeled and acquired restaurants, new technology devices and systems, and other expectations discussed within the course of this call. Although the company believes the assumptions upon which preliminary or initial results, financial information and forward-looking statements are based and reasonable as of today's date, these forward-looking statements are not guarantees of future performance, and therefore investors should not place undue reliance on them. Also, these statements are based upon facts known and expected as the date of this conference call and the company undertakes no obligation to update these statements to reflect events or circumstances that might arise after this call. Participants on the call today should refer to the company's Form 10-K and other filings with the SEC for a more detailed discussion of risks and uncertainties and other factors that could impact the company's future operating results and financial condition. The company has posted its fiscal third quarter 2015 press release and supplemental financial information related to the quarter's results on its website at www.redrobin.com in the Investors section. Now, I would like to turn the call over to Mr. Steve Carley, Chief Executive Officer of Red Robin. Please go ahead, sir. Stephen E. Carley - Chief Executive Officer & Director: Thank you, Nikki. And good morning, everyone. With me on the call here at the headquarters of the Burger Authority are Stuart Brown, our Chief Financial Officer; and Denny Post, our Chief Concept Officer. After we deliver our prepared remarks, we'll be happy to answer any questions you might have. I am pleased to report that we continue to win in a very tough environment. Our performance versus the category puts us in position for the sixth consecutive year in which we have taken market share from our competitors. This quarter, our traffic growth was 150 basis points better than the casual dining peer group and Black Box, despite even more aggressive discounting by some. By executing our game plan, we continue to drive sales, improve profitability, and generate the cash we need to grow our business for the long term. We're on track to complete the transformation of 150 locations this year, with a record number of them currently under construction. Guest voice data shows significantly higher appeal in almost all key measures. The Brand Transformation Initiative upgrade delivers a more enjoyable dining experience, whether you're out with your family or simply with your spouse. Locations that we and our franchisees have updated so far are experiencing revenue increases in line with our expectations, and the locations we have transformed in the past two years continue to comp positively. We're also pleased to report we fully rolled out Robin, or as what others will term Ziosk, in September, completing the process earlier than expected. The rollout itself went smoothly and the results so far are encouraging. Red Robin guests appreciate the ability to pay at the table and our team members get to spend more time engaging with them. Finally, the real-time feedback we're getting from the guest will inform us going forward, as we seek to continually improve our guest experience. We also recently opened two of our mid-sized units with a completely revised floor plan, featuring a center bar and a high-intact exterior. This new prototype allows us to offer our three different guest zones and a smaller more cost-effective footprint. This prototype will be used to maximize financial returns in new markets and infill where we have mature markets. With that, let me turn it over to Denny to discuss what else we did on guest engagement during the quarter.

Thanks, Steve. And good morning, everyone. I'm pleased to report that we continue to drive more profitable food and beverage mix through improved quality, menu innovation, and creative presentation. Our fall promotion included the limited-time edition of the Uberburger to our Finest Line. And to complement the Uberburger and build on the flavors of fall, we rolled out Great Northern Poutine Fries on the appetizer menu. We are the first national chain to introduce Poutine in the United States, which is consistent with our culinary team's dedication to being first to mainstream emerging trends that fit our business. While Great Northern Poutine Fries add interest in appetizers, we also continue to bring fun in proprietary items like the Freckled Lemonade cakes, desserts, and to broaden our range of local craft beers and other adult beverages. All three categories contributed meaningfully in Q3 to building PPA, as guests opted to add items. This approach makes it possible for us to maintain all day, every day value choices such as the Tavern Double with Bottomless Fries for $6.99, $3 appetizers, and domestic draught beer starting at $3.50. As for seasonal news, we rolled out our holiday promo yesterday, which features two new Finest items and some delicious new beverages. I encourage you all to go out and try them. This year, to add gravitas to our Gourmet Burgers and Brews proposition, we became a key sponsor of the Great American Beer Festival, which is arguably the preeminent event for brewers large and small. This event offered the perfect opportunity for Red Robin to build awareness of our growing passion for beer amongst craft brewers. Aside from feeding hungry festival goers some 10,000 servings of Pretzel Bites and beer cheese, we were there to evaluate the gold medal winning local craft beers to determine which ones we will bring to our restaurants and limited-time offerings in their trade areas. Red Robin Royalty continues to grow. The Robin devices on the table make it easier than ever to enroll and to redeem rewards. And our Burgers for Better Schools program, which we launched in September through Red Robin Royalty, already has members supporting 35,000 schools in 50 states. Lastly, as you may remember, this season we are only affiliating with the Seattle Seahawks, having chosen not to renew three other NFL teams. Just to prove that you do not want me picking your fantasy team, the three teams that we dropped have a combined record as of last night of 20 wins and two losses, while the Seahawks got off to what could kindly be called a slow start. That said, we made the choice to eliminate those three teams not as sport bettors but as responsible marketers, freeing up our limited local marketing resources to spend on other programs. Bottom line, at Red Robin, we remain focused on building guest engagement that profits our company and our communities. With that, I'll turn it over to Stuart.

Good morning and thank you all for joining us today. As Steve and Denny both touched on, our third quarter sales and earnings were largely in line with our expectations, with additional benefits coming from lower ground beef costs and income taxes. Third quarter EBITDA increased 22.1% year-over-year or $5.6 million to $31.2 million. Earnings per diluted share increased 16% to $0.58 per share. Compared to last year, the increase resulted from 3.5% growth in comparable revenue and lower cost of sales, partly offset as expected by higher general and administrative costs, depreciation and income taxes. Adjusted EBITDA on a trailing four-quarter basis increased 22.8% to $144.3 million, reflecting enhanced operating performance as well as growth from new units and franchise acquisitions. Adjusted EBITDA as a percentage of total revenues over the same timeframe increased to 11.5%, a 90 basis points increase. The 3.5% comparable restaurant revenue increase was below our expectations and was comprised of 2.2% of price, 1.4% of mix improvement, and 0.1% traffic decrease. The relatively flat traffic number reflected the choppy environment and only one sports sponsorship this year. Even then, we outpaced casual dining traffic growth by 150 basis points, according to Black Box, with comp revenue outpacing by over 300 basis points. Our average check increased to just over $13 per guest, reflecting more guests choosing to add an alcoholic beverage, appetizer and/or a dessert to their meal as we have continued our menu innovation that Denny discussed. The traffic outperformance was also supported by guest responding positively to the improved atmosphere in our remodeled restaurants. The 256 restaurants, now reflecting our new brand standards, continue to grow sales faster and generate even stronger guest metrics than non-remodeled restaurants, and the reason that we increased the number of remodels being completed this year. Third quarter restaurant level margins increased 210 basis points from a year ago to 21.6% as a result of the leverage of higher sales, ground beef deflation, and improved results at acquired restaurants. This translated to an almost 15% increase in restaurant-level operating profit per restaurant on a comp basis. While selling expense, general and administrative costs and depreciation were consistent with expectations, the tax rate was lower than expected due to provision true-ups related to the 2014 tax year and favorable FICA Tip Tax Credits. Moving on to our thoughts for the remainder of the year, we are taking a cautious stance in our fourth quarter outlook. A return of uneven consumer spending, coupled with a significant increase in promotional activity in the industry, has caused us to reduce fourth quarter comparable sales growth guidance. However, our increased operating margin outlook for 2016 and reduced tax rate should largely offset the impact of lower sales guidance. As we have said in the past, we do not believe that running deep discount promotions to drive short-term traffic is a healthy way to sustain and grow business. We have long-term initiatives, including our remodel program, menu innovation, and our successful loyalty program to support the top line while protecting the bottom line. We anticipate continuing these thoughtful investments to grow traffic even as we emphasize items like everyday value with the Tavern Double, Bottomless Sides and Beverages and royalty incentives. Turning to capital deployment, we invested $123 million year-to-date, including $2.5 million to purchase an Arizona restaurant, including land and building, from a single unit franchisee. Additionally, we invested $53 million in remodels, $34 million in new units and relocations, and the remainder in technology and restaurant maintenance. Capital expenditure expectations for the year remain around $170 million, including a total of 20 new Red Robins, three Burger Works, and the 153 remodels. The two Burger Works we expected to open in Chicago in December this year have slipped into 2016 due to construction delays. Also, during the third quarter, we repurchased $10.6 million of common shares. Looking at 2016 growth, we plan to open 25 new mostly mid-sized Red Robins, relocate four units, and remodel around 70 stores. We plan to increase the pace of Burger Works openings as well with five to 10 new units next year. After a significant three-year program to remodel our restaurants front of house and exteriors, you will see us also investing in tools in 2016 to improve productivity and speed of service, which we will discuss more on our February call. Considering the remodel program and new restaurants, 2016 annual depreciation is expected to be around 6.5% of total revenue. Also, remember when modeling Q1 2016 that we'll be lapping over the adjustment for estimated gift card breakage as well as favorable workers' compensation and healthcare costs totaling about $3.4 million, which should be considered when thinking about year-over-year growth. Overall, we're very pleased with our performance in the third quarter where we continue to grow faster than the industry and leverage growing sales and favorable ground beef costs. While we are concerned about the industry trends since mid September, we have been through these periods in the past and know the best course is to stay focused on the guest experience, investing wisely in marketing, and creating value for shareholders. Steve, I'll hand it back to you for some final comments before we take questions. Stephen E. Carley - Chief Executive Officer & Director: Thank you, Stuart. To summarize, we continue to be encouraged with the results we're getting from the Brand Transformation Initiative. We have a strong line up of craveable new food and beverage offerings, and we are still making great progress on finding efficiencies in the business that do not compromise guest service. As always, I'd like to thank our Red Robin team members for their hard work and dedication, as they continue to stand apart from the competition by greeting our guests with bottomless fun and a genuine spirit of service. Our teams are the reason we continue to be the recognized Burger Authority. At this point, operator, let's open it up for questions.

Thank you. And our first question will come from Joseph Buckley, Bank of America.

Hi. Thank you. I have a couple of questions, maybe on the fourth quarter sales guidance. Stuart, I think you referred to trends since mid September. Have you seen from the industry data – I think you guys are Black Box followers, if I'm not mistaken, a slowdown in overall sales that's noticeable since mid September? And maybe discuss your pricing plans for the fourth quarter. You've talked about it before, but in the context of a more promotional environment, please update on that.

Good morning, Joe. Thank you. Yeah, we don't give our own interim performance. But if you look at Black Box from mid-September, I mean, traffic went from positive numbers in the industry in casual dining to negative 3.5% to 4% by the middle of October. So there's been a pretty big drop off in the industry. And as Denny and Steve and I all touched on, we've seen a meaningful increase in promotional activity in the industry as well. Does that continue through the rest of the quarter? We don't know, but we've decided to better take a cautious stance, given what's going on in the current environment and with the consumer. In terms of price, I mean, our price outlook hasn't really changed. For the full year, we've got about a little over 1.5% of price; in the third quarter that was about a little over 2% because we had some price rolling off and in the fourth quarter that'll be 1.6% or 1.7% in Q4.

Okay. And then just on the Brand Transformation Initiative sales lifts, are you still getting traffic increases of 3.5% to 4%? And maybe throw out a little bit the comment about positive comps in year two after the remodels, if you can?

Yeah. No. I mean, now – I mean, we've lost our control group as we remodeled so many restaurants. But if I compare the remodel to non-remodeled restaurants, that 3.5% to 4% continue to hold up really well actually, and we'll be completing almost 70 remodels here in the fourth quarter. So we've got a significant number of restaurants under construction late third quarter, early fourth quarter as well. And yeah, what we've seen the ones that had been open for a couple of years, they continue to comp positively relative to the non-remodeled restaurants. And in looking at the outside industry as well, they continue to do well.

So is that 3.5% to 4% the gap between that the remodeled and not remodeled?

Correct.

Okay. Okay. Thank you.

The next question will come from John Glass, Morgan Stanley. John Glass - Morgan Stanley & Co. LLC: Thanks very much. Just first if I could follow up on the fourth quarter sales commentary. How much of your caution, I'm presuming you're pointing to roughly flat comps, so maybe if you could just sort of confirm that based on your annual guidance, if there's some weighting I'm not getting right? And then secondly, can you talk about how much calendar shifts play a role in that or is that really just, as you discussed, kind of the overall environment?

Yeah. I think it's more the overall environment. It'd be flat to positive. 50 basis points to 75 basis points I think is what's inherent in the guidance, so if you get the weighting in there. And so it's really reflective – I mean, our original guidance considered the shift in holidays already. John Glass - Morgan Stanley & Co. LLC: Yeah. And everyone – you mentioned the competitive environment, I think I've heard that a number of times, it's sort of – but everyone who says it says it's not us, it's others. So, who is it? Is it the bar and grill folks or is it the non-public companies? How pervasive, I guess, is it? And, as specifically as you can be, where is it coming from?

Certainly, the bar and grill have stepped up their activity and, to your point, non-public as well. I mean, I would say it's as pervasive. I looked at some third-party data last night, which has guests reporting as much as 45% to almost 50% on deals from our competitors, whereas we operate – and in fact, in third quarter, we're on the downside more around 15% to 16% reported on deal. So it never ceases to amaze me and we've all talked about, we're all members of multiple email lists and other things. We're getting, in some cases, more than one message per day from some of the competitors. That may be related to geo-targeting, which is something we do as well, but I think there's a combination of national and localized offers that are really driving some very deep discounting. John Glass - Morgan Stanley & Co. LLC: Got you.

And I'm also seeing it on network television as well. John Glass - Morgan Stanley & Co. LLC: Okay. I need to watch more TV or at least some more interesting shows.

Yes. John Glass - Morgan Stanley & Co. LLC: So just a last question on your labor line, it's going the opposite way a lot of what others are seeing in the industry. That is to say, you're seeing favorable year-over-year on the labor. What is your underlying labor inflation? How much of that benefit, therefore, is the acquisitions getting better? Can you maybe tease those pieces apart, please?

Yeah. I mean, the acquisitions definitely play a part of it. I mean, our overall labor inflation for the year is about 3%. We've been holding that pretty well. Probably next year – with California minimum wages going up, next year, it will be higher than that. But so far this year, about 3%. So it's been productivity improvements and really leveraging the sales growth on the fixed costs, and there has been some improvement to the acquisitions and the NROs are doing well also. John Glass - Morgan Stanley & Co. LLC: Okay. Thank you.

Our next question will come from Alex Slagle, Jefferies.

Thanks. Just wanted to expand on John's question on labor and maybe you could talk through what you saw last year during the course of the July minimum wage impacting California and what that tells you about the next increase coming, sort of like the potential pricing needed and how your business reacts in this type of scenario?

Morning, Alex. We'll talk more about the exact impact on our February call when we give full guidance for the year. I mean, if this year is running around 3%, I think when we saw the minimum wage increase in California last time, we saw a 3.5 % to 4% wage inflation. But I'd tell you the environment now from a hiring standpoint is actually a little bit tougher, so I think in terms of thinking to what inflation is going to be next year, you'll have higher labor inflation, so it'll continue to grow. And the good news is, is that on the COGS front with the ground beef going the other way, you'll have a little bit of a flip flop between years of – next year we'll see more benign commodity inflation, but higher labor inflation, and we'll think about that and figure out pricing and talk more about that in February.

Okay. And if you could provide an update on the alcoholic beverage sales and efforts to further accelerate this business, maybe some things Lee Dolan has been working on to jump-start that piece of the business?

We've been continuing to build our alcohol mix in some excellent ways. We're also testing some propositions for next year. Our alcohol mix for Q3 was just under 8% – 7.9%, up 30 basis points. And we continue to grow it, and look for those opportunities to particularly focus on the beers' proposition.

Okay. Thank you.

And the next question comes from Will Slabaugh of Stephens, Inc.

Yeah. Thanks, guys. I want to ask you first on the mix, which is a little bit higher I think than it's been in the past few quarters. So is there anything going on there? And then if you could give us any sort of expectation around what we could see in 4Q and into next year in terms of what that pricing mix looks like?

Yeah. Will, this is Stuart. From a mix standpoint, I think we just touched on the biggest piece of it, which is the alcoholic beverage up 30 basis points year-over-year. Appetizers continue to do well for us, particularly the boneless wings that we rolled out last year and the Poutine Fries had a great mix as well. Even though it's a little bit of a seasonal item, that was great. And we've seen some increase on the dessert side as well. So the things that we've been working on continue to work for us. The menu that we just rolled out this week has got some really great items on there from the Finest standpoint, and we continue to work on the mix side. I think $13 is probably still below a lot of people in casual dining. So we view that as an upside for us.

Got it. And then on CapEx and free cash flow, if I could. Can you remind us when you'll be slowing that pace next year on remodels, and then what the free cash flow picture will start to look like once that happens? And then as a follow-up there, how those investments that you mentioned in productivity and speed of service might impact that?

Yeah. I think overall cash flow, if you sort of think about this year, where we've been a little bit of a net borrower. Next year we'll be largely flat from a cash generation and cash usage percentage, where we will be doing fewer remodels next year going from 150 to 70, but that will be somewhat offset by more NRO. So next year we'll be a little bit more flattish. Maybe late in the year we start to become – third quarter or fourth quarter, we start to become more cash flow generators.

Got it. Thanks.

The next question comes from Chris O'Cull, KeyBanc.

Hi. Good morning, guys. Stephen E. Carley - Chief Executive Officer & Director: Good morning, Chris.

My question relates to traffic, and I appreciate the difficult environment. But what I'm trying to understand is, how much the health of the brand has improved with the food and atmosphere changes made in the past few years? I mean, Denny, do you think guests are perceiving enough of a transformation in the brand or are there other issues that still needs to be addressed before we see sustained traffic growth?

Definitely, our research and our guest voice results tell us that the guest is absolutely seeing a different and positively improved experience with regards to how they're encountering Red Robin. I always focus on traffic all the time. We want to get there to the point where traffic is an organic opportunity and people are naturally coming back with greater frequency. So it's hard to say. I think a lot of it is, again, a very uncertain guest who just simply has not returned to the level that they were before the recession in terms of their confidence for frequency of dining out and choosing to be with us. So I think we're well-positioned for the future for our more confident guest and wouldn't take back anything we've done and continue to focus on the things that I think have the opportunity to consistently build traffic, such as Red Robin Royalty, some of those kinds of activities that we're doing.

Chris, the other thing I'd add as well is keep in mind if you're looking particularly at the third quarter with the sports sponsorships, right. If you go back when we really expanded the sports sponsorship program back in 2013, we outperformed the industry that year at 460 basis points. And so I think as we talked about more profitable promotions, a little bit of what you're seeing in our P&L is probably a little bit of a trade-off of revenue with fewer discounts, and so it's flowing through, which is what our obligation is, right, is to make sure that we're incentivizing guests with the right thing and investing our marketing dollars as wisely as we can.

When you think about the value equation for guest, I mean, it sounds like – I mean, it feels like you guys have addressed the quality of food and the atmosphere, you're addressing the atmosphere issue. But based on the comments you made about some of the technology you are investing in next year, it sounds like service is another big opportunity. Are guests telling you that, I mean, the speed of service is important? I guess, they are. But, I mean, do you think that is – that could have a meaningful benefit to traffic? Stephen E. Carley - Chief Executive Officer & Director: Chris, this is Steve. We look at value as the quality of the food, the price of the food, the service, and then the experience. And the guest looks at all those together as how they evaluate what's going on. When you look at the changes we've made over the last several years to our menu at Red Robin, it is significant. And over this period of time, our message to our operators is just figure it out and muscle through it. We've done a significant amount of work in the past year or so looking at specific tools we can add in to the restaurants, particularly in the back of the house to make some significant gains in both food quality and speed of service. We're going to go through that in significant detail on the next call where we'll be able to talk to you about it comprehensively, but we do think there are opportunities in service and productivity and food quality that we'll be able to begin to harvest in the next year or so.

Okay, great. Thanks, guys.

And the next question comes from Alton Stump, Longbow Research.

Yes. Thank you and good morning. Stephen E. Carley - Chief Executive Officer & Director: Good morning.

Good morning.

I guess, two quick questions. First off, just to follow up on the mix question earlier. Obviously, you guys have gotten great mix now for a couple of years, have several platforms still in place whether it's alcohol growing, it's Finest appetizers. How much more upside do you think there is, I guess, is my question over the next 12 months to 18 months from mix? Or is that now how you think about it from an actual comp lift standpoint?

I think from a mix standpoint, again, if you compare us to the rest of the industry from a mix standpoint that we do is there's probably couple of dollars of opportunity out there. Our alcohol mix at 8% is not setting anybody in the industry on fire, right? We should be in the low-teens, we'll keep calling that back. So we continue to view there's opportunity. However, we're going to do it by putting great items on the menu, beverages and food that people want to pull through, and so we do a lot of research in sensory and making sure there are things that are central and fit well with the brand. And so we're not in a rush to go out there and say, okay, we're going to bring 15 new items on the menu in the first quarter and roll those out. We are going to do it very thoughtfully and continue to build it over time.

That makes sense. Thanks. And then just one follow-up on 2016, which I'm sure you don't want to get into too much detail and we will get more color in February. But I thought I heard you mention, Stuart, that you still are expecting at least some commodity inflation next year whereas I would have thought, based on what happened with beef that your overall basket might be flat to down. Any color you can give me on how things are looking next year from an overall commodity basket standpoint?

Yeah. I mean, obviously, it's challenging to sit here today. I mean, ground beef is 16% of our purchases. We've locked in produce for part of year. Produce is going up, so it's going to go the other way. Ground beef, if you look at what's happened here over the summer and where pricing is, has come down and is starting to trade I'd call it sort of more normally. And so if you sort of took this as a starting point, I think looking year-over-year, you'd expect fairly meaningful commodity deflation in the first half of the year. So we start to cycle over. And in June or so, the big drop in beef prices here in 2015 and then you'll start to see sort of a normal inflation. So I'd expect some inflation on ground beef in the back half and deflation in the first half. But you're right. The overall basket is going to be flat to up 1% probably, and again that's trading a little bit with labor this next year, which will be higher than that.

Got you. Thanks, guys.

And the next question will come from Jeff Farmer, Wells Fargo.

Thanks. Denny, on the last call, I believe you said that Q2 national cable advertising rates were something like down 20%. Where does your national cable rates trend in Q3 and is there anything you can share with us on Q4?

We did a little bit of a different media mix in Q3. We were down – we actually had about six weeks versus eight weeks, I think about – and then in terms of TRPs, we were down significantly, almost 40%. So certainly, media was not in our favor on national level in Q3. Going forward in Q4, I think we have one fewer week, a little bit of a reduction, about 8% down. So we're already laying in our plans, obviously, making our purchases for next year, reconsidering what's the best approach for us going forward with what we have to work with, and looking to make sure that we break through and have the strongest proposition out there.

Okay. And just one more. Stuart, I might have missed this, but on the last call you pointed to, I think it was 75 basis points to 100 basis points from the BTI same-store sales tailwind. I think you said by the end of 2015. So I was just curious if that guidance is still in play? And given sort of the mix of remodels finishing 2015 and the balance you have in early 2016, what could that BTI tailwind look like in 2016?

Yeah. I think the BTI tailwind will continue. So I think that largely holds. Again, you got to put a relative to what's going on in the overall environment, but in terms of what the performance of the remodeled restaurants have been and the number that we're getting completed, again 70 under construction largely getting done here over the next three weeks or four weeks. And then the 70 next year, we'll talk about the timing of that. So that tailwind will continue for the next three quarters or four quarters. As we start to lap over, the majority of the remodels are really probably done sort of August, September this year. So you'll continue the same run rate and then it will fall off.

Okay. Thank you.

And the next question comes from Peter Saleh with BTIG.

Great. Thanks. Just wanted to ask about the Burger Works and what you guys are seeing in the market on that in terms of your confidence to accelerate some of the growth on the unit side for Burger Works?

Hey, Peter. This is Stuart. We continue to be very pleased with the guest feedback and performance of those from a top line perspective. We continue to invest in it. I think I've mentioned earlier this year we put in a food cost system. We've just rolled out Red Robin Royalty at Burger Works this week. So we'll start to get a tremendous amount of data from the existing guests, and then I think signups are already coming in pretty strongly, as well as you have to understand cross-shopping between people, particularly in Chicago, who may be eating at Red Robin in the suburbs and how they're shopping downtown. We've got a few more things that we've got to work on. I think we've talked in the past about putting in place a new online ordering system. The online ordering vendor that we've used before wasn't able to support the volumes of our high volume restaurants. And so that's something that we've been working on diligently, again, and tying it with Red Robin Royalty is something we anticipate rolling out in the first quarter.

Got it. And then can you just provide a little bit more color on Ziosk initiative aside from improving the guest experience with being able to pay-at-the-table, what kind of benefits are you guys expecting going forward from these tablets?

Well, our Robin initiative, Robin being the server sidekick, was very well accepted by our team members and is being used to a large extent for appetizer ordering, for Red Robin Royalty guests to interact and redeem their rewards and, in fact, register. And then we're extremely pleased with the pay-at-the-table percentage that we've seen so far. It's actually exceeded our expectations, and we think it's one of the greatest gifts to the guest, the opportunity to pay and leave when they are ready. So that's where we're primarily focused in on that front. Also in national, we haven't taken out arcade games. A lot of our guests are taking advantage of the $1.99 bottomless game opportunity and we'll continue to work with Ziosk to make sure that that proposition stays fresh.

All right. Thank you very much.

Thank you.

And the next question comes from Brian Vaccaro with Raymond James. Brian M. Vaccaro - Raymond James & Associates, Inc.: Hi. Good morning. And thanks for taking my questions. Just a couple of quick clarifications, if I could. First is on the food cost inflation. Stuart, what was the third quarter food cost inflation on your basket?

Food cost inflation in Q3 was actually negative about 3%. So it was a deflation number about 3%, and Q4 will be somewhere around the same, probably 2.5% to 3%. Brian M. Vaccaro - Raymond James & Associates, Inc.: Okay. All right, great. Shifting over just to labor costs. You alluded to sort of potential productivity and speed of service benefits with some new tools next year. Hoping you can provide a little more color on sort of where you see the opportunity there? I mean, obviously, we've seen others implement some new kitchen equipment that improves the consistency and quality of the food, maybe also provide some hourly labor savings in the back of the house. But is this the type of savings we're talking about or is there also opportunities maybe to free up managers or any color you could provide there would be really helpful as we think about the 2016 labor dynamic? Stephen E. Carley - Chief Executive Officer & Director: Brian, we're right in the process of putting all our plans to bed for 2016. I think you hit on number of the key benefits and we're looking across the board at the same things. And as I said before, we're going to give you a much better understanding of what we're doing and what we expect the impact to be when we get back in February. Brian M. Vaccaro - Raymond James & Associates, Inc.: Okay. And then, Stuart, on the 2016 cash flow comments that you made a few minutes ago. As we think about lower remodels, if we're doing 70, assuming around $400 million, that's still – or a $400,000 a box, that's around $30 million, the 25 new units that gets you to – if we're assuming $2 million to $2.5 million on new units, we're getting to around $100 million, which leaves a pretty big difference versus your CapEx budget this year. And I just want to make sure I'm not missing anything on the plug, and it would seem that some of those productivity savings potentially, is there anything I'm missing in that reconciliation?

No, I think overall you've got to remember there's four remodels in there as well, so there's probably another $10 million or so.

Relocations.

You've got the – yeah – I am sorry, not remodels, four relocations. You've got the technology investments, right, that we'll be making next year as well that we've alluded to and we'll talk about more on the next call. And then you've got normal repair and maintenance CapEx, which runs $18 million or so a year. So I think overall we, again, will be cash flow generators, I'm not trying to say, listen it's – that we won't be, but it's not the next year, it will be really 2017 where there will be more significant free cash flow generation. And obviously talking today to the board about what our opportunities to further accelerate growth in 2017 as well as other ways to put capital to use accretively. Brian M. Vaccaro - Raymond James & Associates, Inc.: Okay. Very helpful. And then just last quick one. On the last call, Stuart, you had mentioned or you had provided some pretty specific third quarter and fourth quarter SG&A guidance, and I think you'd indicated sort of towards the 10% range around that for the fourth quarter. Any change to that outlook between your G&A or selling expense components? Thank you.

No. I mean, I think you've got the year-to-date numbers on G&A and selling both. And the full year guidance was pretty easy to sort of back into implied Q4, so you get selling expense again for the year 3.3% and that's pretty much we've been running year-to-date. So that will be about 3.3% of revenue in selling and G&A at the midpoint implies around a $20 million G&A number in Q4. Brian M. Vaccaro - Raymond James & Associates, Inc.: Yeah. Got you. Thank you.

We'll take our next question from Steve Anderson, Maxim Group.

Good morning. It's a heavy question. I know some of your competitors have talked about the Texas market and having that be a drag on same-restaurant sales. You don't have a lot of exposure there, but have you noticed any regional differences with regard to your performance either in this past quarter or heading into fourth quarter?

Hey, Steve, this is Stuart. We've only got as of today two corporate restaurants there. We've just opened up in Colleen this week and really pleased with how that's opened. But if I look at also how our franchisee as a group has performed there. Again, they are not in the oil patch, mostly Dallas, Houston, Austin, San Antonio, their performance has been quite good. I think overall from a market perspective, looking at Q3, I mean, we saw strength in California and the Western U.S. and looking at Black Box, it was really the mid-Atlantic and Northeast that was a little bit slower for us – not for us, but for the industry in Q3. But Texas overall, our franchisee is reporting pretty good numbers.

Okay. Thank you.

It appears there are no further questions at this time. Mr. Carley, I would like to turn the conference back over to you for any additional or closing remarks. Stephen E. Carley - Chief Executive Officer & Director: Thanks, Nikki. We appreciate your time and interest this morning. We look forward to talking to you in February and have a great holiday. And as Denny said, get into Red Robin and check out our new terrific holiday promotional items, so we can get your feedback when we talk next. Take care and have a great day.