Texas Roadhouse, Inc. (TXRH) Q3 2022 Earnings Report, Transcript and Summary

Good evening and welcome to the Texas Roadhouse Third Quarter Earnings Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to introduce Tonya Robinson, the Chief Financial Officer of Texas Roadhouse. You may begin your conference.

Thank you, Josh. And good evening, everyone. By now, you should have access to our earnings release for the third quarter ended September 27, 2022, it may also be found on our website at texasroadhouse.com in the Investors section. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse. Following our remarks, we will open the call for questions. Now I would like to turn the call over to Jerry.

Thanks, Tonya. And good evening. We are proud of our third quarter results, which were highlighted by strong top line performance driven by the hard work of our operators. We were especially pleased to see sales growth accelerate month-to-month, resulting in an 8.2% comparable sales growth for the full quarter. This top line momentum helped generate strong growth in restaurant margin dollars leading to nearly 24% earnings per share growth. These results were achieved in spite of the continued impact of cost pressures throughout the business. Our August and September periods benefited from strong guest demand resulting in increased quarterly dine-in traffic compared to both 2019 and 2021. Weekly To-Go volumes also remained healthy throughout the quarter at over $16,000 per restaurant. During the third quarter, we completed our semi-annual review of menu pricing for both Texas Roadhouse and Bubba's 33. Based on our discussions with our operators, we recently implemented a 2.9% price increase. Taking menu pricing is never an easy decision for us. However, we are confident that our commitment to protecting our value proposition will continue to build long-term relationships with our guests, which we have done for nearly 30 years. Moving on to development, we remain encouraged by the performance of our newest restaurants, including Texas Roadhouse openings in smaller towns. This performance confirms our belief that we still have significant growth opportunities for many years to come. As we sit here today, we believe the Texas Roadhouse concept has the potential to grow to as many as 900 domestic restaurants from its current size of just over 600. We are on track to open 23 Texas Roadhouse and Bubba's locations in 2022, with 14 open so far this year, and our international franchise partners have opened six Texas Roadhouse restaurants with one or two more expected by year end. We are also pleased that our fifth Jaggers location opened in October. For 2023 our development pipeline remains strong, and we are targeting approximately 30 Texas Roadhouse and Bubba's openings as well as three Jaggers. Additionally, we have a tentative agreement with one of our domestic franchisees to acquire eight restaurants at the beginning of next year. We also expect our franchise partners to open 12 international and domestic locations in 2023, including three Jaggers. As we look to next year, our strong financial position allows us to invest in our restaurants, focus on our people development, and provide the infrastructure needed to support operational excellence. We will continue with this tried and true approach, which has proven to be a consistent builder of shareholder value. Finally, over the past month as part of our annual fall tour, I had the opportunity to see our managing partners. It was great to meet face to face and listen, learn, and take action on their feedback to better support their restaurants. Their passion, along with their commitment to our operating principles will continue to push us forward to even greater successes in the future. Now Tonya will provide a financial update.

Thanks, Jerry. For the third quarter of 2022, net income increased 18.5% to $62.3 million. And diluted earnings per share, which includes a benefit from share repurchases, increased by 23.7% to $0.93. Revenue growth of 14.3% versus last year was primarily driven by a 7.9% increase in average unit volume and store week growth of 6.1%. For the quarter, comparable restaurant sales increased 8.2%, driven by 7.7% average check growth. Guest traffic was up by a half a point overall with dining room traffic up 3.3%. We continue to see positive mix driven by year-over-year improvement in the percentage of guests choosing to dine in as well as dining guests continuing to order higher price to entrée. Our restaurants averaged over 129,000 in weekly sales in the third quarter, and to-go represented approximately 16,300 or 12.6% of these total weekly sales. To-go sales volumes were consistent throughout the third quarter with a percentage increasing slightly in the back half of the quarter. By month comparable sales grew 3.9%, 9.9%, and 10.4% for our July, August, and September periods respectively. And our sales momentum have continued into the fourth quarter. For the first four weeks of the quarter, weekly sales averaged 130,000 with comparable sales up 8.3% as compared to the same period in 2021. For the third quarter, restaurant margin dollars grew 12.5% to $152 million and were 15.4% as a percentage of total sales, down 26 basis points as compared to last year. Restaurant margin benefited from a $6.6 million adjustment to other sales related to a change in our historical gift card breakage assumption. As a reminder, in the third quarter of 2021, we had a similar benefit in other sales of $4.8 million. Food and beverage costs as a percentage of total sales were 34.7% for the third quarter, up nine basis points compared to 2021. This increase was primarily due to commodity inflation of 8.8% in the quarter, mostly offset by the benefit of menu pricing. With roughly 70% of our fourth quarter commodity baskets secured with fixed prices, we have lowered our full year commodity inflation expectation to approximately 10.5%. Looking ahead to next year, we are projecting commodity inflation of 5% to 6%. We currently expect the first quarter of 2023 will be impacted by higher inflation as we lapped easier comparisons and will moderate as we move through the remainder of the year. While our guidance assumes that the cost of many of the items in our commodity basket will remain elevated, most of our inflation next year will be driven by higher beef costs. Labor as a percentage of total sales increased 24 basis points to 33.5% as compared to the third quarter of 2021, while labor dollars per store week increased 8.6%. This increase in labor dollars per store week was driven by wage and other labor inflation of 7.7% and growth in hours of 1.8%. These increases were partially offset by lapping a $2.6 million adjustment to our quarterly reserve for workers' comp and group health insurance. Based on current trends, we continue to expect approximately 8% of wage and other inflation for the full year. For 2023, we are forecasting wage and other inflation of 5% to 6% with upcoming state mandated increases representing nearly 2% of the increase. Other operating costs were 14.8% of sales, which was flat as compared to the third quarter of 2021. The year-over-year benefit of sales leverage was offset by a continuation of the higher costs that we are seeing in areas such as utilities, credit card charges and repair and maintenance expense. Other operating also benefited from the impact of adjustments to our quarterly reserve for general liability insurance. These adjustments include a $4.4 million benefit this year compared to a $3.2 million benefit last year. Moving below restaurant margin G&A for the third quarter grew year-over-year by 3.8% and came in at 4.3% of revenue. The primary drivers of the increased year-over-year G&A spend were a $4.1 million increase in cash and equity compensation and a $2 million increase in meeting and travel expense. These increases were partially offset by a $2.5 million adjustment to a cost of our managing partner conference held in the second quarter and the effective lapping the approximately $3 million expense for the abbreviated conference that we held in the third quarter of last year. Our effective tax rate was 15.2% for the third quarter, and we continue to expect that our full year 2022 tax rate will be approximately 14%. Assuming no changes to the tax code, we would expect an income tax rate of approximately 15% for 2023. With regards to cash flow we ended the third quarter with $185 million of cash, which is up $5 million from the end of the second quarter. Cash flow from operations was $96 million and was offset by $65 million of capital expenditures and $31 million of dividend payments. We continue to expect full year 2022 capital expenditures will be approximately $230 million increasing to approximately $265 million for 2023. Now I'll turn the call back over to Jerry for final comments.

Thanks, Tonya. Before I turn the call over for questions, as a Florida native, I want to offer my sincere condolences to everyone impacted by the devastation of Hurricane Ian. Thankfully, our restaurants suffered minimal damage and because of the resilience of our Roadies, we were able to quickly reopen and serve our communities. I also want to thank Andy's Outreach, our employee funded assistance program for providing much needed financial aid to our impacted Roadies. I am so proud to be the head coach of such a people first company that truly values its employees and provides service with heart to our communities in times of need. Operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Brian Bittner with Oppenheimer. Your line is open.

Great. Thanks for taking the question. Tanya, as it relates to 2023, are you able to talk about the percent of the food basket that you currently have locked so we can just better understand what type of visibility you have into the 5% to 6% commodity outlook or maybe any other assumptions that you have that's underpinning the commodity outlook for next year? And then I have a follow-up.

Sure, Brian. We don't want to disclose any type of data around what we have locked at this point. I'll tell you we don't have just because it's so early, we are still in discussions with vendors, and suppliers and we'll wait until February to give an update on where we are from that perspective. I'll tell you though, things really haven't changed a whole lot from what we've been talking about all year, just in the fact that it is tougher to kind of lock up those prices particularly on beef. And those contracts tend to be a little bit shorter maybe than what we've seen pre-COVID. So that really hasn't changed. But we're still really working on that that end of the basket. And overall, just any other information I could give you, as I said in the scripted section, most of the inflation that we're guiding to in that 5% to 6% is driven by beef. The rest of the basket saw some pretty decent inflation in 2022. And so while we still think costs will go up on those items, it's just not as much of a driver as what that beef is. And beef was one of the better performing items for us in the basket in 2022. So, we saw some softness on those beef costs in Q4 just as everyone has read with the kind of calling of herds and things like that. And we think that we're going to maybe see some of that coming back in 2023 as far as affecting what supply looks like along with just drought situations and that impacts. So we have that built into that 5% to 6% to some degree of just expecting supply to make things a little more difficult and supply constraints and things like that.

Well, thank you. I appreciate the first look in the 2023 from you. And just as it relates to pricing, I think, the 2.9% price that you just took in October, I think, that replaces 4.2% that falls off in November. So I think you will have about 6% pricing in place until April. So just confirm that if you could. And the question is, how should we think about the pricing strategy for the full year of 2023 in response to this kind of 5% to 6% commodity inflation? Just so we all as analysts can better understand how to think about your COGS margin trends for next year?

Sure. So yes, in Q4 this year, it will be – pricing will come in at about 6.3%. And you are right, you are going to have just a little bit of impact from that 4.1% that rolls off in November. And then at that point, you will just be looking at the 3.2% that we took in April of this year, along with that 2.9% that we just did. So for Q1, that puts you at about 5.9%. And then it kind of goes down from there, having no additional pricing throughout 2023. And really Brian, I'll just kind of tell you start that conversation of we're going to continue to do two looks at pricing. We'll do one again probably starting in March as we come upon that April pricing falling off and then continue to do a later year one. We feel like that just gives us more visibility and ability to react kind of what's going on out there in the environment. So that feels, kind of like what we want to do. But I'll tell you the goal isn't necessarily to offset inflation. We want to make sure that we're really, again, thinking of that value proposition as we usually do. So that's really going to be the more of the focus for us than trying to increase our margins on a short-term basis.

Okay, thank you.

Your next question comes from the line of Eric Gonzalez with KeyBanc. Your line is open.

Just maybe a big picture question on the margins, in light of the full year inflation outlook, which seems to have improved relative to where we were earlier in the year. Just wondering how you are thinking about the margin potential. There is obviously some opposing forces between sales and cost, but maybe if you think you can get back to that 17% plus restaurant margin next year, and what might the assumptions be on food inflation and sale that would get you there next year? Thanks.

Yes, Eric, I think with the guidance we gave on commodities and labor, under that scenario and with the amount of pricing that we'll have in the menu, a lot depends on what we take in 2023, especially in April as far as what lift you get there. But it could be tough to get back to 17 to 18 next year. It feels like where we're ending this year feels really good. Especially when we think about where we started out this year as far as all of the uncertainty we had on the commodity baskets. So we’re pleased to see things ending that way. But I think outside of margin percent we feel like we can put up a really good year next year of restaurant margin dollar growth and then store week growth, which is so important for us. So from that point of view we feel pretty good about it.

Thanks for that. Just real quick maybe on building costs, some of your peers are calling out, delays in permitting, construction, and I'm just wondering has it gotten better or worse over the last three or four months? And maybe if you could talk about how much inflation you are seeing on the construction side, year-over-year?

Yes, I would say that overall it's holding right now, still a little bit of delays. We're definitely getting some tight timelines on some things, but we're getting it done. I think as far as the material cost it’s been holding, labor still continues to be probably the bigger challenge even for our partners out there. But we feel good about it. I don’t see it really escalating at this time, but we’re getting it done with the numbers that we’re baking in for the IRR and moving forward. So right now, just a little bit on the delay side on equipment, just really staying very focused on being able to get it done. Right now, just a little longer than typical, but we’re going.

Sounds good. Thanks.

Your next question comes from the line of Jared Garber with Goldman Sachs. Your line is open.

Great. Thanks for the time today. Tonya and Jerry, could you help talk about consumer demand a little bit? You noted strong trends throughout the quarter, positive traffic, which is certainly encouraging to see, but we continue to hear and see incremental pressures on the consumers. It seems like you guys are bucking the trend a little bit with some of the commentary around consumers sort of trading up to higher priced items. So, maybe if you could just help frame what you’re seeing on a consumer basis for us that would be really helpful. Thanks.

Yes. I think with the 50 basis points of mix that we saw that’s in the check number, I mean, that felt really good that we continue to see the consumer staying up into those items that they had traded up to in 2021. You don’t really see anything coming back. Obviously, it’s always a little too soon to think about pricing and the flow through. It seems good right now. We aren’t seeing anything that raises any red flags. So that’s definitely a positive. You could say there’s a little bit on alcohol, but who knows what really drives that. It’s really nothing too significant. And overall, it feels good. I think the health of the consumer feels good. Demand continues to be strong for our brands. We’re seeing good traffic growth across all dayparts and days of the week. So from that standpoint, all good from our perspective.

I mean if you look at July, August to September, it’s a very positive trend for us, which is extremely exciting going into the fourth quarter.

Great. And then, I guess, just following that, how are you thinking about that demand curve bending or not into next year?

I think for us, it’s still moving forward, it’s focused on driving top-line sales and feeling like we have a lot of opportunity to do so. The To-Go transaction stays very sticky and looks like it’s holding along with those dining room sales going up. So that normal seasonality seems to have come back in play that we talked about in July. So, we’re expecting a very great holiday season heading into the fourth quarter and in high gift card sales heading into the new year, a lot of redemptions from that perspective, which are always great things. So, I think overall, we would say we feel very confident in our ability to continue to drive sales in a positive way.

Great. Thank you.

Your next question comes from the line of Brian Harbour with Morgan Stanley. Your line is open.

Yes. Thank you. Maybe just another one on commodities. It sounds like what you’ve – what you’re talking about is just kind of a timing issue where there was some more beef pressure expected in the fourth quarter, but that sounds like it’s just getting delayed. I guess the question is, is there any reason some of that pressure wouldn’t materialize in 2022? Or why has the timing changed for some of those expectations?

Brian, are you talking about beef specifically or just the overall basket?

The overall basket, but it sounds like beef is kind of the main driver of that within the basket, right?

Right. So, I would tell you, we saw some softening. We did see some softening in Q3, Q4 on those beef costs. I think for a lot of different reasons that kind of played out. I think right now, beef inflation across the quarter and the cadence for the year on that is pretty consistent. There isn’t anything that’s really driving it. There’s not much volatility there that we’re assuming right now. So some of that is just the timing of what we did in 2022? How we’re lapping that? The rest of the basket, you didn’t really see those prices tick up until Q2 into Q3 on some of those grocery items, particularly like bread mix, oils, things like that. And so that’s why it is a little heavier on the inflation number in Q1 as we lap that. And then as we said in the call, it just moderates down from there. So that’s kind of the way we’re looking at it right now. Now there’s a lot of things that could change that. Obviously, we could see supply change faster. Any changes in demand one way or another, would have an impact. But right now, we’re kind of assuming a steady course from a demand perspective and then just trying to estimate kind of what we think that supply does based on cows going up for slaughter and things like that.

Okay. That makes sense. Thank you. And then, Tonya, maybe just on G&A. Are there any – would you expect 4Q to kind of be similar to what we’ve been seeing? Anything unique in there? And if I were to think about 2023, do you think it will kind of look similar as a percent of sales?

That’s our expectation right now. We focus on keeping G&A growth on a dollar basis less than revenue growth, and then keeping it pretty in line from – as a percentage of revenue. So that’s going to continue to be our focus on that line. Nothing that I would call out in either Q4. Now in – heading into 2023, we will be having our comp – Managing Partner Conference in Q2. This is our 30th year celebration. So it is a biggie. We’re really excited about that. So as we continue to get back into the rhythm of those conferences, the cost on that will be a bit elevated compared to what it was in 2022. So outside of that, though, those would really be the bigger things I would call out.

Okay, great. Thank you.

Your next question comes from the line of Jake Bartlett with Truist Securities. Your line is open.

Great. Thanks for taking the question. First, I want to start and then I have a follow-up, but I want to start with the beef again. Just one other question on that. In – we see toys box beef down year-over-year currently. So, I would have thought that, that would kind of take a little time for you to age it and flow through the system. So, I would have thought you would have seen actually maybe even beef deflation now or starting the beginning of the year. So is your expectation for higher overall inflation, a function of the non-beef stuff items really in the first quarter of 2023 or is there any other nuances to how you purchase beef that I’m missing here just by looking at the commodity market? And then I have a follow-up.

Sure. I’ll tell you, we did see some beef deflation both in Q3 and Q4. We saw a little bit of overall beef deflation that kind of helps with that. The overall commodity basket, because you were continuing to see those other non-beef items escalate a bit. And so that was really positive. We’re not assuming any of that kind of softness, if you will, heading into Q1 based on what we’re lapping and the way we’re buying. Now that could change a little bit as we continue to lock up anything and you see what the play – kind of the play in the market is going to be, again, for that supply and for demand, and we’ll just continue to kind of see how that goes. So again, this is just a first glance. It is early days, and we will be continuing to tweak these numbers as we get kind of into the year.

Great. And then my other question was on the labor inflation guidance, the 5% to 6%. You talked about 2% of it being from just from minimum wage increases. But when we think about other concept this morning talked about, the actuation [ph] for a mile or a moderate recession in the U.S. And I’m trying to think about that kind of 5% to 6% labor inflation in that kind of environment. So one, just how confident or what kind of – I don’t know if you could have visibility, but how do you get to that kind of such a high wage inflation estimate? And then the other part of that is, it seems like in 2022 and even in 2021, there was exit, there’s – abnormal cost training. Turnover was very high and there’s training and productivity was low, because of all the new people. But are there some offsets to the wage inflation that you’re expecting in 2023?

So just kind of to start with that first part of the question. I’ll tell you, when we think about that 5% to 6%, as we said, that 2% is in there that’s state mandated. Some of that is just driven by these higher CPI states. There are states that are based on CPI increases. And so with the increase that we’ve seen in CPI, it’s driving some pretty high wage rate increases in those states. Then you have other states like Michigan, who are making some pretty significant changes to their wage structure. And so that all kind of builds up. That number normally would be in the 1%, 1.5%. So that is a bit more than what it usually would be. The remainder, it’s not just wages for us, it’s wages and other inflation. So benefits come into play. So, as we continue to look for ways to retain and attract talent. We’re expanding benefits and improving those. And then also, just as we are thinking about how we continue to retain great talent at the volumes that we’re running and that maybe it makes it a little bit different for us. Because we are running such large volumes, the staffing is critical. So, we’re – our expectation even if there were some type of recession or slowdown, we feel like we’re very well positioned to kind of meet that challenge. We would continue to need to be staffed. We would continue to drive sales because of our value proposition and then just the demand that we see for our products.

Thank you very much.

Your next question comes from the line of Peter Saleh with BTIG. Your line is open.

Great. Thank you. I was going to ask a question on beef, but I think that’s been addressed here. So, let me ask on just labor here. Tonya, can you give us a sense on the labor availability, how that’s progressed through the year? How do you feel about that today? And how has turnover been among the staff over the past couple of quarters?

Yes, I’ll answer that for you. It has continued to be easier and better, and I guess, more applicants flow throughout the summer. So that is exciting. We really have gotten to a point where we feel very comfortable with our staffing. And again, we’re going to continue to pad that and add some superstars and we get the chance. And what was the other part of it?

Just on turnover, has turnover improved.

Yes, it actually has. On management and hourly, we’ve definitely seen through the summer, it really settled and reduced. So, I think we’ve done a better job of connecting and really painting the picture of where the company is going. And I think people are starting to settle in to the routine going into the fall, back-to-school, all of that and they’re settling in. So, I definitely see us being staffed completely, maybe still a little bit of a challenge in the back of the house, but overall management, very solid. Hourlies are there and with the reduction of turnover, we feel very good about that, having a little bit more of an experienced workforce out there running the shift. So a positive sign there for sure.

Okay. Good to hear. How about the hour – the labor hour growth rate going forward? How should we expect you guys to grow that given what we’re seeing right now in traffic?

I think right now, you continue to see it a bit elevated above traffic growth, just like we saw this year – or this quarter, as we continue to get fully staffed and based on the volumes that we’re seeing. So, I think you see that for a little bit. I would expect it to start kind of getting a little bit more back to normal in 2023, potentially and that would kind of be our expectation. But we’re always just making sure our operators know staff for the sales they have, staff for the sales they want and make sure they’re just making the right call on that. So, we’ll see how that plays out.

Thank you very much.

Your next question comes from the line of David Tarantino with Baird. Your line is open.

Hi, good afternoon. Congratulations on such strong sales performance. I have a couple of maybe…

Thank you.

You are welcome. I have a question, Tonya, a clarification on your G&A for the third quarter. I think you mentioned that you got a credit for the Manager Conference in there. So, I guess what’s – is it right to think that the underlying G&A was around $45 million? And is that what you expect going forward in the fourth quarter?

You’re right, David. That $2.5 million credit would have brought that number down a little bit. So, you have to adjust for that as you’re thinking about what Q4 is going to look like, yes.

Okay. Great. Thank you. And then my real question is about unit level returns in the current environment. I know you’ve seen some increases in restaurant profit dollars per week in your model, but I think there’s also been some cost increases. So, I was wondering if you could maybe just level set us on kind of where the return profile is and maybe on Texas Roadhouse and Bubba’s? And how close or how much margin you have relative to your targets on that metric?

Sure. So on the rest – on the IRRs, we’re targeting mid-teen returns for both concepts. And we do take into consideration a little of the current environment as far as what we’re seeing happening from a cost perspective. We look at sales in the area around where that restaurant is going to be as kind of a guidelines for what sales we think we can do. And then we get a lot of input from the market partner for that restaurant, because they really understand that area and know what they can do from a sales perspective. So all those things kind of go into play. We also look at the TCI – the restaurant margins. We call it total controllable income at the store level. But we look at TCI for stores around that area, too. So, we can get a feel for here, we being reasonable on our expectation of the TCIs that store can run. And it depends, David, really, there’s no set number, because it just depends on where they’re located, what their wages look like. That’s really the bigger variable is labor percentages. Commodities stay pretty similar across the country. It’s really more labor, rent, things like that, that make it kind of move it. But overall, the returns look really good. And Roadhouse has been running. You have Roadhouse restaurants on a look back after 18 months that are well above 15% on a return perspective. Bubba’s continues to be a solid number, but they’re working on a lot of profitability on that side of the business. And so we are still – the returns are good. We’re able to approve sites to open, but we’re hoping to see a little more profitability improvement at those restaurants.

That’s very helpful. Thank you.

Your next question comes from the line of Chris O’Cull with Stifel. Your line is open.

Great. Thanks. This is Patrick on for Chris. Tonya, I wanted to have just quickly follow up on what you just said. And I was curious if you could break out how much of the 2023 CapEx development guidance will be allocated to new units versus maintenance spending. And then are there any opportunities to value engineer the Roadhouse prototype at this point to help improve the returns you just talked about?

Sure. And I’m kind of crunching numbers right now, Patrick, to try to give you that breakdown. Because typically, on stores, CapEx and maintenance, we are estimating anywhere from $130,000 to $140,000 per store for the year. It’s kind of the number we expect to hit. And that includes doing bump outs and cooler bump outs and all of that CapEx at existing restaurants. Then we do have a number in there for relocations. So, we do have a fair number of relocations that are expected also in 2023. Overall, in that $265 million, about $150 million of it is allocated for new stores based on opening approximately 30 and you have carryover right, from one year to the next from what you’re opening last year versus what you’re opening even in 2024 will play a part. And then about $30 million in relo is kind of how that looks. So that leaves what about $80 million or so just for normal maintenance CapEx at existing restaurants.

That’s really helpful. Thank you. And then I wanted to ask too about traffic relative to 2019. It looks like, if my math is right, you’re up about a little shy of 13% to 2019 in 3Q in traffic. Can you help us understand how that looks sequentially from 2Q relative to pre-COVID levels? And how much of that improvement was sequentially quarter-over-quarter?

I don’t have Q2 in front of me right now, hold on one second, and let me see if I can get to that number. So Q2 from a same-store sales perspective, this is all-in sales on a three-year stack was 30 – about 30% for 2022 – Q2 2022 versus 2019 and then obviously for Q3, we came in at about 32% on all-in sales. On traffic, that number came in at about 10% and 11%, respectively, for Q2, Q3.

Got it. Thank you. That's helpful. And then just lastly, Jerry, I know you mentioned the Managing Partner Conference and potential operational efficiencies that you gleaned there. I was just curious if you uncovered anything noteworthy that was would help efficiency in the stores that you guys are thinking about implementing on the back end of that?

Well, I think you're probably talking about our fall tour that we did. We're just out visiting with all the operators over the last five weeks. The biggest thing is we are operating very well. We've got to continue to work on getting them equipment and product in a timely manner, so they can do their job. And I think the biggest thing we learned is how to help them behind the scenes, whether it be just with our big vendor partnerships. And we're really happy with our food and our service and our community partnership and the maintenance of our facilities. It's a matter of – at our volume it's a matter of getting them the food, the equipment and the supplies that they need on a timely manner, so that they can open and operate their businesses. So what we heard loud and clear is that we need more of all that, and which is an exciting thing for us. The fall tour to me is a great opportunity to meet with every managing partner out there to really discuss what we're foundationally what we're trying to accomplish and then how can we help them. Our company is turning 30 years old. We're very excited about that. We are having tremendous results. And I think it's because we're fundamentally sound in what we're trying to be, and that is the best operators in the industry. So I'm very proud of the group and what they've accomplished and will continue to challenge us all to be the best at what we do.

Great. Thanks guys.

Thank you.

Your next question comes from the line of David Palmer with Evercore ISI. Your line is open.

Thanks and congrats. A question on the cost one more time. Last quarter, I think you were thinking 9% inflation in the back half. And it seems you were close to that in the third quarter. So I guess inflation would be more like the 4% to 5% range in 4Q. I'm wondering, if that's right, is that easing beef or is it a mixture of things? And what would be those things that are perhaps coming down or starting to come down in 4Q?

Part of it, yes, would be easing of beef. You're seeing some on other proteins, which are a big part of the basket too. You're starting to see some of that occurring. And it's interesting because the inflation in 2022 was just such a – all over the basket. It wasn't really highlighted on 1 particular item in the basket. So you're seeing a little bit of help kind of across the board again as you kind of see some of that softening occurring. So some on beef, but a lot on some other protein items and some of the other non-protein items in the basket, too. And you are about there. That's about where we would – I would expect, David, as you're thinking about 10.5% for the year. Obviously, you can kind of back into what that might be for Q4 and it's going to be a lower number than what we saw this quarter.

Yes. I guess the other thing I was going to ask you about was these buy-in of units from franchisees, the second year you've been able to do it. Is it all completely random, the timing of this? It feels like you have the right to buy them at predetermined prices. And I'm wondering if this might be the – a gift that keeps on giving where you see more of these coming due and you have the right to buy them in, and you can see the benefit coming up in the coming years. And I'm also curious if you could share what sort of prices you pay for these? I mean, is this very accretive? Thanks.

Sure. There really isn't – we do have a predetermined formula. It's included in our franchise agreements. But historically, we don't use that. We really just have to do a negotiated deal based on where those stores are from an EBITDA perspective, sales perspective. Looking at them from how the shape of the building and the assets and the management teams and just a lot of different things come into play as we're valuing those stores. So really, we like to do them at the beginning of the year because it's just a nice clean cutoff. That's probably more of a driver of the timing than anything else. And we've been talking with – we're always talking with our franchise partners, honestly. We're always catching up on just how things are going and what they need from us. And then some we start down the path of having that conversation about if it's the right time for them and their owners to consider that buyback. So we've been lucky to get two of those deals. A deal done at the beginning of each year that feels like a really good pace. And we think we do have some continued opportunity for the next couple of years to continue to do that, but it is a negotiation and our franchise partners they've been great partners, continue to be great partners. And so we definitely want it to be a win-win situation. And overall, from – it is very accretive. It adds about 1.5 – 1% to 1.5% from a store week growth perspective is what this deal will add, so 8 restaurants. And then it's very accretive to the bottom line. So I don't really want to talk too much about multiples or purchase prices as we continue to do some negotiations. But I feel, again, like it's a really good deal for both parties.

Thank you.

Your next question comes from the line of Jeffrey Bernstein with Barclays. Your line is open.

First question was just on the sequential comp trends. It seems like you guys are seeing improvement through the third quarter, at least based on the absolute numbers. I'm just wondering whether you think that there's any masking of a slowing macro within there. I know the October comp in the 8% range eased, I guess, from the September and the 10%. Just wondering if you think that compares or maybe a return to some seasonal patterns? Just trying to get a sense of whether you think there is any underlying softness at all? And what initiatives might you implement if trends were to slow, whether it's this quarter or going into 2023?

Yes. I think that maybe it would just tick down a hair for September, but it was comparable to August. So as we head into November and gift card sales in the season, it looks like so far, we're trending holding very, very well and we expect that will continue, but we will put our big push on gift card sales, which really creates a lot of fun as we get into the holidays and see how things go from there. But as of right now, it looks like we'll probably – I think we're going to be close to that same 8% to 10% and have that momentum going into the holidays and running from there. So it could change, but we're prepared right now to keep executing and doing what the consumer wants and I think they'll reward us for it.

And Jeff, I'll tell you, too, when you go back and we kind of looked at the October number for that reason. Like is there anything there? I think it's really just four weeks, it's too much to – you can't read a whole lot into it. But I'll tell you, when you go back and look at 2019 cadence, you see the same pattern as far as July soft, August, September tend to be a little higher, and then October tends to be a little softer. So that gave me some confidence. And along with just the performance of mix and things like that to say, hey, doesn't feel like overall softening, I think it's just seasonality, and we feel really good, as Jerry said, about heading into the holiday season.

Got it. And if you were to see softening in coming months or quarters, is there a different approach you would take? Or how would you go about addressing that as you were trying to meet the customer, who's feeling a little bit more pinched? I don't know if there's any specific initiatives you might implement or whether you kind of stick with what's driving true?

Well, I think, we'll continue – if we needed to press harder on our early dine time line or even our Wild West Wednesday. We got a couple of things that we could do or press on a little bit harder if we needed to get out there that really screens that value with our early dine and our Wild West Wednesday would be the two key components that we could be a little more aggressive on.

Yes, I think we definitely would want to take a look at what was driving it. And if it was something we were doing that we had some impact or if it was just an overall softening and then at that point, we know stick to what we know and keep doing what we do, and just work through that.

Got it. And lastly, can you just clarify, I think you said you expect 6.3% pricing in the fourth quarter. I just wanted to confirm what it was in the third quarter? And if inflation were to play out as you expect into early 2023, would you be inclined to not take incremental price in April to maintain that value message if we were going into a slowdown? Just trying to, again, clarify if inflation played out as you thought, whether we would see no real increase in that April window. Thank you.

Yes. I mean, like you said, we'll continue to look at what the environment looks like in February and March, and talk to our operators and see what's right for the business. I think we've always been inclined to look at those two pricing opportunities and see what's the right thing for the consumer and the right thing for the business. So a little early right now for us to – we'll follow our process. We'll start really investigating in February and March to make that April decision based on the environment that we'll be working in at that time.

Yes. And it's – Q3 was about 7.2% on pricing, Jeff, and obviously, that Q4 at about 6.3%. I think were the numbers you're asking for too.

Great. Thank you.

Thank you.

Your next question comes from the line of Jeff Farmer with Gordon Haskett. Your line is open.

Thanks. McDonald has touched on this today for the fast food segment, but do you expect your casual dining peers to remain rational from a, I guess, discounting or promotion perspective given the elevated inflation backdrop?

I truly don't know. I mean I think you hear folks saying they want to stay away from discounting. This is just my speculation. We don't really follow it over wide as far as what others are doing from that perspective. I can see where it would be easy to kind of fall back on that discounting if you were in their shoes trying to drive sales. You know, Jeff, from us, we stay away from that discounting and things like that. So it's not really something we even follow from a competitive standpoint too much.

Okay. And then not to harp on McDonalds too much, but another interesting question came up on their call earlier today, which was sort of juxtaposing the business, 2008, 2009 versus 2022 and 2023. You guys did fairly well. I mean, casual dining got had a hard time someone in that recession, but you guys outperformed. If we theoretically go into a recession in the U.S., how should we think about the performance through the lens of what happened to the Roadhouse business in 2008, 2009, if we were to go into a recession next year?

I think the way we would think of it is, we came in, in 2008, 2009, we had negative traffic. Remembering back to that point, I think we came in a little later with that. We were able to hold on the traffic a little bit longer. I think, again, speaking to the value that we have in the menu is really the benefit there. And then coming out maybe came out a little bit earlier. And the big thing for us that we focus on is the fact that following that, we generated 10 years of positive traffic growth. So we know that, that consistency is what's so important. And so really, maybe it's more about the things we wouldn't do as far as taking labor off the floor or cheapening the experience, we're going to continue to give the guests a great experience. We know that's what matters. I think just from my viewpoint, it's a little different when you look back to 2008 and 2009, because of where the labor market is. And we really aren't seeing the same labor market today. So it will be interesting if that does play out, just how that kind of works and what the impact is. Maybe you see costs come down even as demand is coming down a little bit. But I think overall, we control what we can and give the guest a great experience, and that's the kind of the way we would be – we would enter into it.

Yes. I think the key component for us is that if we have to adjust to the volume, we are prepared and ready, but the delivery on the experience for whatever the consumer is coming in the door has got to be. That's where we were rewarded for ten years after, is that we didn't change portion sizes, we didn't lose our focus on the food or the service or the experience. And through tough times you make adjustments, but you still deliver on your promise. And that's what led us into a great ten-year run. And if that were to happen, we would expect the same focus from our operators and the same commitment from our company.

Helpful. Thank you both.

Thank you.

Your next question comes from the line of Lauren Silberman with Credit Suisse. Your line is open.

Thank you. I wanted to ask another one on comp and the acceleration through the quarter and into October. I guess, what's your sense of how much is driven by underlying industry improvement relative to share gains? Just given the value proposition any sense you are getting the benefit of some trade down from higher cost restaurants?

Lauren, I mean, we could be, I wouldn't have – we don't kind of look at it in that way, but there is certainly that opportunity. I think some of it is to-go continues to be strong. So even with the dining room guests coming back in on a more frequent basis, we're still seeing to-go holding in above 16,000 a week. So, that I think means a lot. And so I think we picked up a lot of guests in 2020 and 2021 who didn't know us until then, and I think we're holding onto those guests. So could be some share. I don't know how we would necessarily prove that out or see that, but, I think, it speaks to also that you are seeing the guests kind of trade up into some of those higher items and hold on there in 2021 and continue to do that in 2022. Maybe that speaks to some trade down, from a higher guest check. But overall I just think it's the consistency again of what we offer and keeping the guests coming in the door.

Great, Thank you for that. And Jerry, I think, you might have mentioned the potential, you guys now see the potential for 900 Roadhouses over time. I think historically you've talked closer to 700 to 800 in the past, so I just want to confirm, is this an increase from what you've communicated historically? And if so, can you just talk about where you are seeing some of those incremental growth opportunities?

Yes, absolutely. We do believe that we changed that number because we do see the upside and because of the success in some of the smaller communities that we've been able to go in really allowed us to up that number. And then it is really exciting to see some of the areas that we would typically, probably the smaller communities and we're having tremendous success. So we're going to continue to find a good spot for us, which when we look at the landscape, that means that we have the opportunity. If we continue to do it right and all the world works with us, we think that we can get to that number.

Thank you very much.

Thank you.

Your next question comes from the line of it, Dennis Geiger with UBS. Your line is open.

Great, thank you. I wanted to ask another one sort of on the broader state category and Tonya or Jerry, if you have sort of a view that the brand is clearly seeing tremendous success, presumably taking share within the category, but curious if you have a sense or if you've done work on sort of broader stake category demand. I know you've spoken to this before, but it has the strength seemingly across the category surprised you to date the demand there from the consumer? And just as far as how you think about that going forward if it is part of the equation for you, thinking about the category?

Well, I mean, I know the other competitors are having some success also. They are maybe not doing the volume that we're doing. So that to me tells me maybe whatever we're doing works a little better from a value standpoint. So staying focused on that piece of it, our offerings, our consistency, our disciplines to the routines of the experience, I think, will all help drive that. I mean, our food is made from scratch and we put a lot of time and effort into it. And I think it really plays out in the taste buds of our consumers. So we're winning that battle. And I think we will continue to win it as we fight for it. But people love protein and a steak of potato and a salad, low dip [ph] potato by the way, that's the way you win the game.

Absolutely. One more just on capacity levels and kind of maybe the biggest opportunities to increase traffic, maybe it's days of the week, maybe it's an hours of the day. Tonya, I think, you spoke to strength across days of the week, across hours. Just curious about sort of the biggest traffic opportunities, perhaps maybe it's bump outs, maybe it's plenty of capacity across all those opportunities. But I'm curious if you could just kind of touch on that as we think about the strength you have seen over the last couple of years. Thank you.

Sure, yes. It continues to be the same story of the stores that have the stronger sales are the ones that continue to drive strong traffic. And so I think we continue to have ability on the traffic side of things across the company. I don’t know that anyone – we would say anyone who has hit capacity or doesn’t have that ability. I know every operator would tell you they have the ability to continue to drive traffic. And they find those ways through a lot of different avenues, whether it’s guest management systems and how they’re seating and KDS in the back of the house potentially as we’re thinking about. That continuing to roll out to stores. And technology overall, I think, helps them from that standpoint. The way they’re doing to go and managing that in a kitchen. But I think overall, yes, you mentioned all of the things I would mention, whether its bump outs, adding seats, obviously, is a great way to go. And you see strength on the weekends. I think you still can – that’s always our busiest time. And I think you can continue to see opportunity, as Jerry mentioned earlier in the day part. You have stores opening a little bit earlier in some cases because there’s lines out the door. So I still feel very confident there’s a lot of ways to continue to drive traffic, and I think our operators are going to continue to figure that out.

Yes. And I would – Monday, Tuesday, Wednesday, we know that we have room to grow, which is exciting. I think the early part of the business, like Tonya mentioned was are 3 to 5.30. That’s a segment that we can continue to focus on and get folks to come in a little earlier. We know our legendary hours from 5.30 to 8.30 are very, very busy, which is awesome. But we can also focus on that 8.30 to 10 and help maintain or get folks in a little bit later. And those are great opportunities for us as well as even Saturday lunch. Our Saturday lunches, I think, is an area that can continue to – it’s really strong. But there are definitely segments of the business and we run nine or 10 shifts. There are hours in there that we can work on the capacity side, but the bump outs, all of the other things that we do, the more seats available help us, too. And we’re continuing to invest in that. Our relocations are bigger restaurants, which are really serving the community at a higher level. So we’re excited about the relocations. When we get an opportunity to build a bigger store with more seating that shows us that we can continue to grow the sales at the level we’re at.

Great color. Thanks guys.

Thank you.

Your next question comes from the line of Joshua Long with Stephens. Your line is open.

Great. Thank you for taking my question. You’ve touched on a couple of different points in the call, but I was curious if you could talk about how you think about protecting that overall value proposition outside of just the menu price culture, your legendary service. That’s a huge part of what keeps guests coming back to that. And so curious if there are aspects or areas where you’re investing in that culture, that experience for your team members above and beyond just some of the labor inflation that we talked about.

Well, I mean I think we got to create an environment that people want to wear our uniform and our logo. And that means that we have to – for our employees, it’s about being a people-first company and really focusing on that and really trying to create a mentality or a mindset that people believe in what we’re doing and how we’re doing it. We’re making our food from scratch. We’re committed to high-level hospitality and partnership. Every one of our MPs are bought into the business. And I think that level of community, us going out and doing a fall tour, traveling around every region and every state, talking to our partners and listening and hearing. That’s a part of our culture. It’s a part of us being aware of what their needs are and what – how can we help them accomplish running their business at the very high level. So I think part of our culture is about being committed to helping each level be successful, whether it be an hourly employee, a management or a partner. How do we help everybody? Our folks here at the support center knowing the role and how we execute and how we take care of our partners. That’s a big part of our culture, always will be.

That’s very helpful. And one quick follow-up. In terms of the CapEx split out that was offered earlier, very helpful. As you think about the current environment and where construction cost inflation is and just the unit pipelines and some of the delays that we’ve heard about across the industry. Is that an opportunity to perhaps lean into some of the maintenance piece or some of those bump outs? Or just how nimble can you be or how efficient are you thinking about being in terms of some of those CapEx dollar deployments on a go-forward basis outside of just opening new units?

Well, we go through a pretty extensive process to budget, and it really is more about making sure that we know the projects that are coming up, and we’re working with our regional facility managers and our market partners to get done what they need. So our goal is really to make sure that we’re maintaining those assets, that’s the number one focus. It’s not as much about we only have a certain amount of money to spend. It’s more about what do we need to spend. Because we know when we take care of the assets, we can drive sales, it does help a lot. So that’s really what we’re focused on when we think about that CapEx. I think even in times of inflation, we don’t necessarily want to slow that down. We want to continue to push and make sure we’re taking care of everything. And if we see some opportunity from a cost perspective to jump on a few more things, we’ll certainly try to do that. But right now, I think we’re living in a little bit of an inflationary environment. We expect costs in 2023 to be somewhat similar to what they were this year. And I think we’re just going to be living with that inflationary environment for a little while, but it’s not going to put things down, so, yes.

Great. Thank you so much.

Thank you.

Your next question comes from the line of Jim Sanderson with Northcoast Research. Your line is open.

Hey, thanks for the question and congratulations on a great quarter. I just wanted to follow up on the menu pricing. I think if I understand your process correctly, you’ve gone through and talked to your partners throughout the country to come up with that 2.9% menu price increase for late October. How does that position you relative to your peers? Did you go through a process of reviewing how other steak houses and trade areas were taking price up? Does that keep you a little bit lagging or ahead of the game with respect to competitors?

Yes. I think it’s a clear component of where we want to be positioned. So do we know where we stand or stack against our competitors? Absolutely. And when we look at our pricing structure and how we do things and how we plate our food, it’s an important component that drives the value as well as the presentation. So yes, we go through an extensive process of making sure we know where our gap is and what we have in our offering. And we feel very good about that process.

And is the way to think of that, that you’re trending in step with your competitors or maybe holding back a little bit? Just trying to get a sense of positioning.

I don’t know exactly what they’re taking and doing. I just know that we’re very comfortable with where we’re at.

Probably thinking about that gap, especially like Jerry said on certain menu items, I think that’s where we really keep our focus. And our value is on the menu, because we don’t see that discounting off menu. So that’s something that is definitely important to our process.

Understood. And just a quick follow-up on the purchase of the eight franchise units. Is there anything to call out regarding maybe unusually strong average weekly sales or exceptional store margin, anything that might impact the corporate averages going forward?

And there’s always a little bit of savings from a cost perspective as they come into the company just from sheer volume. Whether it’s insurance, just different things like that. But overall, it’s a good, strong group of restaurants, pretty on average with what we see from a company perspective, from a sales perspective. And we always expect that we’re going to have a little bit of savings just again from being a large company like we are able to get a little bit from that perspective.

Alright, understood. Thank you very much.

Your next question comes from the line of Sara Senatore with Bank of America. Your line is open.

Hi, thank you and thanks for staying late for this. I just wanted to ask a question about the three concept Bubba’s, Jaggers and Texas. I know the former two are not big on a relative basis. But given that you have a lens across kind of different models, fast casual, if you will, versus casual dining and different customer bases. I was just wondering if you are seeing anything different, whether it’s around the price point or the type of customer or the frequency, just as you compare across them with acknowledging that you have a much bigger sample for Texas than you do for the others. Thanks.

Well, Texas Roadhouse has a dinner concept, has that customer. I think Bubba’s probably shares some of that. We’re a lunch and dinner and burgers and pizzas. So a little bit of a country theme versus a rock and roll theme and the energy. The energy in both concepts are very well. And so I think we’re seeing success in sales and profits in both Bubba’s and Jaggers. Jaggers, we’ve only got five stores up and running. We just opened our most recent one 1.5 months ago, and we’re very pleased with what it’s doing. So – and it’s a fast food QSR side, but we’re very pleased in all three concepts of the food that we’re serving and the hospitality that we’re trying to create the experience. So all three are a little bit different. Bubba’s is just – it’s an exciting concept. It’s fun. It’s energetic, pizzas, burgers, wings, all of the offerings that we have that makes it very different. But – and it’s got a different vibe. So it’s fun, absolutely fun. And Jaggers, man, it’s just pretty good.

Okay. Thank you. That’s noted. But just – and then in terms of the current environment, again, it sounds like just sort of seeing strength across all three as opposed to kind of different consumption patterns, depending on the day parts or the segment that you’re addressing, like you said, kind of QSRs, fast casual versus full service?

Yes. I mean, the Roadhouse and Bubba’s both generating traffic growth. So that’s really good to see. Bubba’s has a little less pricing in the menu than Roadhouse does. So comps are a little lower because of that. But from a traffic perspective, looks really good. Jaggers, it’s really early days. We are seeing good success and we have four restaurants. So learning a lot on that concept and seeing some really good success in consumer uptake on that. It’s a lower average check, obviously, drive-through, and that makes it a bit different, but we’re seeing some good uptake from the consumers really – it’s resonating with them. And I think as Jerry said, it’s the food is phenomenal.

Got it. Right, good food, good prices is working. That makes a lot of sense. Thank you very much.

Thank you.

Your next question comes from the line of Andrew Strelzik with BMO Capital Markets. Your line is open.

Thank you and thanks for squeezing me in. I’ll lump two questions together here. The first is on the pricing conversations that you had with your partners. Did you note any maybe change in the tenor of those conversations this time given kind of the dialogue around the consumer environment, less inflation that you’re facing versus the prior several maybe rounds of those pricing conversations? Was there more variance maybe in the feedback? That’s the first question. And then the second question is just on the value proposition, which obviously you’re very comfortable with, and the trends are very strong. But I guess if we were to go into an environment where we saw a lot of deflation or the food away, foot at home excuse me, environment got much more value-oriented. Would that kind of change the way that you think about it? Or how would you go about preserving the value equation? And do you see that as a risk at all? Thanks.

I’ll you, Andrew, on the second – the last question, we haven’t seen that necessarily historically. Food away from home has varied over the years, and you don’t necessarily see a lot 1 way or the other from that, I don’t think. And maybe that’s because we’re a steakhouse, which kind of elevates people’s expectations and what they’re coming out for. They want to come out and have that great experience, have that steak and all of that. So it doesn’t play as much a part for them when they see value in food at home. I don’t know for sure, but that could be some of it. So I would say that’s kind of the way I would see it from that perspective. And then the first part of your question, you were talking about pricing. I’d tell you, we took less pricing and what’s rolling off. I think that speaks to the operators being comfortable with how things are looking and versus a year ago when we were facing some pretty big uncertainty from the inflation standpoint, particularly on the commodity side, and labor continuing to go up and all of those things. So I think overall, they do feel the tone was very good. They do feel good about their ability to drive top line traffic.

Great.

Your next question comes from the line of Brian Vaccaro with Raymond James. Your line is open.

Hey, thank you. Just two quick ones for me. I just want to circle back on sales. You obviously saw a nice acceleration in the three year trend over the last three months. As you think about Q4 Tonya, is there anything unusual or calendar shifts, et cetera, which we should be mindful of? Or is that a reasonable run rate to think about working through our fourth quarter assumptions?

There really isn’t anything from a calendar shift. I think for Christmas shifts from Friday, Saturday to a Saturday, Sunday. So it’s still kind of that weekend event. So there could be some positive benefit, maybe a little bit because you lose Friday, but we’re not really thinking. So Halloween going from a Sunday to a Monday could be slightly positive, but we’re not really building a whole lot in from that perspective. So I don’t think there’s anything. We are lapping kind of the Omicron impact from last year. So we think that could be a positive for the rest of this quarter, so as we head into January, February. That’s really all I can think to mention, Brian.

Okay. Great. And on the other OpEx line, you digested some very high inflation in that line this year and last. I’m curious if there are certain costs in that line that are starting to plateau? And as you think about 2023, could you see inflation in that line flatten out, if not potentially turned deflationary, given how unusually high they’ve been in recent years?

I mean, I think that’s always possible. I think some of the items you’re seeing in their utilities, they just tend to be – they tend to ride pretty big waves of volatility. So we’ll see kind of how that plays out. Some of the positive performance on the other operating line is masked a bit because of that benefit that we had. The benefit from that GL insurance reserve is masking some of the inflation is what I mean to say. So we are still seeing continued inflation on credit card charges. That’s more just usage on credit cards, the types of payments that are getting processed, utilities, repairs and maintenance. Maybe there is some opportunity as supplies get a little bit easier. It’s easier to get a hold of equipment. Maybe we see a little less on the R&M side, we’ll see. So I would like to hope so, but I think it might be too early to say.

Okay, alright. Thank you.

Thank you.

There are no further questions. I’ll turn the call back to Ms. Tonya Robinson for closing remarks.

All right. Thanks, Josh. Thanks, everybody, for being on the call tonight. If you have any other questions, do not hesitate to reach out. And everybody, have a good evening. Thank you.

Thank you.

This concludes today’s conference call. You may now disconnect.