Good afternoon, ladies and gentlemen, and welcome to the Red Robin Gourmet Burgers Incorporated Third Quarter 2016 Earnings Call. Today's call is being recorded. During the course of this conference call, the company may make forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts, reflect the company's beliefs and predictions as of today and therefore are subject to risks and uncertainties as described in the Safe Harbor discussion found in the company's SEC filings. During the call, the company will also discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with the generally accepted accounting principles, but are intended to illustrate an alternative measure of the company's operating performance that maybe useful. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the company's earnings release available on its website. The company has posted its fiscal third quarter 2016 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'd like to turn the call over to Ms. Denny Marie Post of Red Robin. Please go ahead, Ms. Post.

Thank you, Vicky, and thank you, everyone, for joining us on this lovely Colorado afternoon for our discussion of Q3 results and 2016 year-end outlook. Our Chief Operating Officer Carin Stutz and VP Finance, Ted Watson will join us for Q&A after Terry Harryman and I finish our prepared remarks. As we shared in our press release two weeks ago and in the final information released shortly before this call, Q3 revenue and earnings fell short of expectations. Terry will provide more details shortly. While falling short is always disappointing, it is only part of a bigger story. One with quite a few positive elements. As I laid out, on the Q2 call, we knew we had to move quickly to improve our value proposition to generate higher top-of-mind awareness and to reverse our declining speed of service trends. The value and awareness fronts, we made on the value and awareness fronts, we made a decision to invest and reasserting our everyday value offerings beginning in Q3, consciously trading off average check. We launched three new items in the Tavern menu, each at $6.99 and each served all day, every day, with our famous Bottomless Steak Fries. Where before there was only one choice at $6.99, now there are four. This much needed news on our Tavern platform moved us back to beating the competition on traffic as measured by Black Box. We have been steadily gaining grounds since late last year, and we took a major leap forward in Q3, moving ahead of our competition by 120 basis points. It feels good to be ahead of the pack again, the vision or the view is better, but we won't rest until traffic is positive and even then we won't rest. Resting is not how Red Robin roles. To improve…

Thanks, Denny, and good afternoon, everyone. I'd like to start by referring you to our earnings release and supplemental package for complete information on our result as I'll only be hitting the highlights, discussing key trends and other business matters in my prepared remarks. Loss per diluted share in the third quarter was $0.10 on a GAAP basis. This differs from the loss of $0.23 per diluted share in our pre-release due to a revision in income tax credits. After adjusting for restaurant impairment and closure costs of $9.3 million that were recorded in the third quarter of 2016 as well as the revised related tax benefit, earnings per diluted share were $0.38, a decrease of 34.5% from $0.58 in the third quarter a year ago. Adjusted EBITDA for the third quarter of 2016 decreased 12.6% to $27.3 million compared to $31.2 million in the prior year. Q3 mark the fourth consecutive quarter of negative comp sales for the casual dining sector. Additionally, traffic for the sector has been trending down since the first quarter of 2015 and has been negative for six consecutive quarters. Red Robin's comparable restaurant revenues declined 3.6% during the third quarter of 2016 compared to an increase of 3.5% in the prior year. Our traffic was down 2.4% in the third quarter, which was an improvement of 150 basis points compared to the second quarter of 2016. Our efforts to close the gap and traffic relative to our casual dining peers from 150 basis points in Q4 of 2015 and 60 basis points in Q2 of 2016 accelerated in the third quarter as our traffic driving initiatives began to gain traction. We took market share in Q3 and outperformed our peers by 120 basis points according to Black Box. As Denny mentioned, we continue to…

Thank you, Terry. To reiterate, we see our recent upturn in traffic and operating performance as validation of our decision to refocus on everyday value, top-of-mind awareness and improved speed-to-table. Our operations teams are making strives and guests are noticing. Further, we have made and we'll continue to make the decisions we need to make to improve profitability. I receive a lot of messages increasingly positive these days from guests who reach out to me on social media. Few weeks ago, I received one on LinkedIn from a father who thanked me for many years of fun Red Robin meals together with his three, now fully grown boys. I thanked him for his loyalty and I told him, we looked forward to serving his sons lots of fun meals with their families in the years to come. While we know we must regain market credibility through steady, quarterly performance, as a team, we're equally focused on another measure of success, being here to serve generations to come. I'm confident that with the continued hard work of our frontline, we will be doing just that. With that, let's turn to Q&A. Terry, Carin, Ted and I are all happy to take questions.

Thank you. We'll take our first question from Chris O'Cull with KeyBanc.

Hey, great. Thanks. Good afternoon.

Hey Chris.

Hey, Denny. Denny, I appreciate the focus on improving traffic performance, but it does appear that the efforts are being a drag or a strain on profitability, can you help us understand whether you believe the company has over earned in the past and needs to accept maybe a lower margin or whether you have a plan to really improve customer profitability once you get more of these guests in the door, and I have a follow-up?

Yeah, no, it's a great question, Chris I don't think we've over earned in the past. I think bringing the Tavern Double menu more visible in our restaurant, it had not traditionally been on our promotion, promo card. And so, we think this is an opportunity to get more guests aware of it. And we'll begin to see the benefit in greater frequency down the road, as well as broader reach. It supports, of course, as I said every day, all day, so with us being traditionally as strong at lunch as we were at dinner, it's good to have that $6.99 everyday, all day value out there. So I think we still have great opportunity, we're seeing actually highest ever mix on our Finest line on the other end. So we continue to have information there. So our Finest mix is strong at over 9% actually. And so we're doing really well with both Finest and Tavern. It's a nice balance on that barbell menu. So no, I don't have a concern about that going forward. We continue to have upside also, of course, in alcoholic beverage. For the first time this quarter, we saw a little bit of a stutter on that. We took about a 0.5 point – 50-basis point hit and that was primarily due to our Happy Hour initiative, which we've now paired back to a 175 restaurants that we're managing as the most profitably. So, I think we're finding our way through it, but I'll stand for everyday value, all day, everyday.

Should we expect – well, it sounds like in the fourth quarter, we should expect the average check to maybe be down a little bit, but how do you – how should we think about this going into 2017? Should we continue to expect flat-to-down average check for Red Robin?

We're still working on our full 2017 guidance, and we'll talk about that when we get together in February. And we have a number of things in test right now that we'll inform that. So I don't want to carry it into 2017, but I think you're on the right page for the fourth quarter.

Okay, great. Okay, back in queue. Thanks.

We'll go next to Will Slabaugh with Stephens.

Yeah. Thank you. I want to ask about to-go. You've talked a lot about that and the EBITDA potential there over time. Can you give us a little more color on what you think the most important steps as far as getting there, it sounds like KDS is one of them? And then addressing sort of what you think the consumer demand is, and why you think it is that strong there for Red Robin?

We have a wide variance right now in how well our to-go business does. We are, on average, like I said about half of the category so less than 5% mix on to-go currently. We have some that are in – some of our locations in double-digits, who have focused on it traditionally, put dedicated labor behind it, or well-located to take advantage of it. So – and everything we've seen even from third-party providers like DoorDash, tell us that burgers are one the highest searched categories, when people are looking for options. So we think there is a demand out there to be filled. We, as far as steps to take KDS is absolutely critical. Having Carin onboard is a great benefit to us. She was one of the pioneers with another concept a number of years ago, lot of years ago. And so her expertise is going to make a big difference for our operating environment and how we understand, how to manage it. But, we think obviously getting the online ordering, making sure our Red Robin Royalty is completely integrated with that which is a real key advantage for us, we'll be – we believe, one of the first to have online integrated with a strong loyalty program. And then beginning to lean into it, with finding just the right occasions to touch those guests, we think we have a lot of upside.

Got it. And then also if I could, want to ask you just a little more around the value proposition. You mentioned that everyday value working pretty well for you this quarter. Is that all Tavern, which you referencing now, and then as you think about your value prop right now, is more of an expansion around the Tavern platform in the future, or is there something else that needs to be added to further enhance that everyday value proposition at that brand?

I'd say it starts with Tavern and more choices at $6.99, which certainly helps us, but again our Tavern Double menu ranges up to $8.49 for some of our items, and so we're continuing to see good trial in all those areas. The next key component is our Bottomless proposition, and we're measuring via our tabletop media, where we know that out guest wants to be asked if they want more fries and even if they don't chose to take advantage of it, they want to make sure it's acknowledged. So Bottomless continues to be a big opportunity. We've added some more items that are now in our Bottomless offerings and that helps a great deal. And then beyond that continuing to Red Robin Royalty Reward, those guests that give us the highest loyalty is the way we want to go. We're not looking at any kind of broad discounting or propositions that we ran years and years ago.

Thank you.

We'll go next to Brian Vaccaro with Raymond James. Brian M. Vaccaro - Raymond James & Associates, Inc.: Good evening.

Hey, Brian. Brian M. Vaccaro - Raymond James & Associates, Inc.: Just wanted to ask, regarding the implications on the financial model related to your announcement to slow unit growth, as you think about CapEx into 2017, are there any projects or anything that we should have in mind that might impact that line? And a rough first half would seem to suggest CapEx could be down maybe cut in half next year or may be $75 million, $80 million, is that a good rough start?

Hi, Brian, this is Terry. Certainly our CapEx related to new restaurants is going to be cut in half. However, we're still working on our 2017 plan, and we'll be able to speak more freely to that on our first call in first quarter. Brian M. Vaccaro - Raymond James & Associates, Inc.: Okay. And Terry, as you think about deploying that free cash flow potentially and maybe speak to, is there a targeted leverage range that you're comfortable with? I think, your credit facility allows you to go up to four and three quarters, I think, you said it was around four, but is there a targeted range? Do you see yourself paying down some debt next year potentially or are you comfortable where you are?

Yeah, Brian. Historically, I think, we've targeted somewhere in the range of 3.75, somewhere in that range. Obviously, we are above that now. I think, our first concern obviously is to make sure that we properly capitalize the company as we're in kind of choppy an environment here. So we certainly will look to make sure that we are focusing on that when we're looking at our capital allocation. I will mention that as I had mentioned in my prepaid remarks, we are wrapping up BTI through the end of the year here and so that will free up about $30 million of CapEx as we go into 2017. Brian M. Vaccaro - Raymond James & Associates, Inc.: Right. Right. Okay. And then, on the underlying G&A, you mentioned several savings initiatives there. Can you help quantify the magnitude of those potential savings or maybe how should we think about G&A as percent of sales as we go into 2017?

Brian, we're not ready to talk to that for 2017 at this point, but we will be happy to give you an update on our Q4 call. Brian M. Vaccaro - Raymond James & Associates, Inc.: All right. Fair enough. Shifting gears, just one, if I could. On the store margins in the quarter, obviously some pressure there, a couple of hundred – a few hundred basis points. I was hoping you could provide a little more color as to how much of that is due to some of the labor and local marketing investments that you made in the quarter versus maybe the impact, you shift in strategy towards value? Can you maybe provide a little more color on those labor and local marketing investments?

On the labor front, we had about $500,000 to $600,000 of incremental labor that we invested as a part of the KDS rollout. And on the local restaurant marketing front, I know we've made some incremental investments, I don't have that specific amount.

About another $400,000 to $500,000.

About another $400,000 to $500,000, yeah, in the quarter. Brian M. Vaccaro - Raymond James & Associates, Inc.: Okay. All right. Very helpful. And then, last one from me. On the Burger Works closures, can you help quantify the trailing 12-month sales? And I think you mentioned it was a loss, can you help provide some color on that, on the magnitude of that?

We're all looking at Ted, because he is the Burger Works expert here.

Yeah. I'm sorry. Can you repeat that Brian, the magnitude of sales? Brian M. Vaccaro - Raymond James & Associates, Inc.: Yeah, the nine closures, what was trailing 12-month sales and EBITDA or store-level profitability, however you would like to address it?

Yeah. I would tell you on the trailing 12-period lookout, those restaurants probably averaged $700,000 to $800,000 on the top line on an annual basis. And then looking at the impact to the P&L itself they were certainly negative. What I would tell you is we're in the process of looking at re-subleasing out those sites. So there's still going to be some impact into 2017 from a lease cost. I would tell you just to go ahead and assume status-quo at this point, and we'll have a better update in February. Brian M. Vaccaro - Raymond James & Associates, Inc.: All right. Fair enough. I'll pass it along. Thank you.

Thanks, Brian.

We'll go next to Stephen Anderson with Maxim Group.

Yes. So, good afternoon. I just wanted to follow-up on a question – actually a follow-up on your – on the Red Squared initiative that was announced earlier this year, I know KDS has been a part of that. And I congratulate you on the rollout of that. But is there anything else that we should keep in mind that heading into 2017 under this Red Squared umbrella?

I think you can definitely because Red Squared, a large part of that was pretty aggressive growth, that's where the 30 units per year or more target was first revealed. So I think you can anticipate as we review 2017 and talk about probably about a three-year plan when we get together in February, you'll see much more emphasis on growing Four Wall Volumes and improving our economics there before we move forward on any kind of aggressive development. But certainly KDS is part of that, we'll know more in February about how well our tests are going on, carry-out, catering and delivery and have some better direction at that point.

Thank you.

We'll go next to John Glass with Morgan Stanley. Christopher E. Carril - Morgan Stanley & Co. LLC: Hi. Thank you. This is Chris, actually on for John. So could you give us a sense of what you're seeing in the overall competitive landscape in casual dining, particularly as it relates to promotional intensity during this past quarter? Thanks.

Yeah. Chris, there is a lot of, I mean, it's – I don't know that it's any stronger right now, except that I would say, where you used to open an email and maybe see one offer, you're now opening and rolling down and seeing three and four being pushed forward on a weekly basis by some and a lot of our competitors who do already have carry-out propositions, (31:52) is starting to market or incent those on regularly getting 20% off offers who carry-out from certain locations. So, I feel lot of – I don't know what to call it, well, let's just say a lot of bating with low price like a $5.99 starting at offer that will have one item around that, but most of the items aren't in that price range. We really pride ourselves on having held the $6.99 Tavern Double price point now for almost five years. And we think the guest gives us a lot of credit for that as well. They don't limit it to a certain day part. I feel a lot of lunch-only promotions right now. We see a lot of day of the week kind of offerings. Lot of things that we've tried in the past and are no longer pursuing. So it's interesting to watch, but I think our everyday value proposition is what our guest is looking for. Christopher E. Carril - Morgan Stanley & Co. LLC: Okay, thanks. That's helpful. And one follow-up if I may. Are you seeing any changes in terms of day parts on your traffic?

No, not really. Earlier in the year we saw some week part, we saw some weekend degradation. And we really worked to improve our service on weekends. That was what I was alluding to with the NPS scores, but we're consistently in a 50-50 mix between lunch and afternoon versus dinner and late night. So we've always stood well at lunch compared to many of the other casual diners. Christopher E. Carril - Morgan Stanley & Co. LLC: Okay, great. Thank you.

We'll go next to Stephen Anderson with Maxim Group.

Just I wanted to follow-up on some of the labor costs, just wanted to see what's your hourly wage rate inflation outlook is for next year, if it represents an acceleration from 2016? Also wanted to see if you have any insight into the overtime regulation?

Yes, Stephen. This is Ted. Good question. As far as the Q3 labor inflation impact, it ran at 5.6% for us, if you compare that on a year-to-date basis we're up 5.2%, so a little bit of an acceleration. I would tell you to expect mid-5s% for Q4, so much the same of what you'd seen in Q3. Again we've not given formal guidance for 2017, but what I would tell you is we would expect labor to continue to be pressured probably with costs of goods helping to offset that.

Yeah. Thank you.

We'll take a follow-up from Chris O'Cull with KeyBanc.

Thanks. Just a follow-up on that Ted, how much it was labor pressured in terms of basis points because of wages versus deleverage, self-deleverage?

Yeah. So, if you take the 5.5% that I just alluded to, just purely from wage impact, and then you're looking at it as a percentage of revenue, I would tell you that probably half of that deleverage resulted from wages and the other half from self-deleverage.

Okay, great. Thanks. And then given the change in development plans over the next couple of years, has the company changed its incentive comp measurement away from EBITDA growth?

No, we haven't made changes in our incentive comp plans at this point. However, as we're planning for 2017 and longer-term, we are considering what impact that would have on those comp plans.

Okay. Okay. And what was – I may have missed this but, what was the commodity deflation number in the quarter?

Yeah. Cost of goods deflation was down 2.9%.

Great. Thanks, guys.

You bet.

You're welcome.

And we have no further questions at this time. So, I turn the call back over to our speakers for any additional or closing remarks.

Thanks again, Vicky, and thanks again to all of you for joining us today. We look forward to sharing more about our plans for 2017, and the years beyond on our call in the February. Thank you, all.

That does conclude today's conference. We thank you for your participation.