Earnings Call: Q1 2020

Nov 26, 2019

Good morning, and welcome to the Cracker Barrel fiscal year 20 21st Quarter Earnings Conference Call. Today, all participants will be in listen only mode. Please note that today's event is being recorded. At this time, I would like to turn the conference over to Adam Hansen, Manager of Investor Relations. Please go ahead. Thanks, operator. Good morning, and welcome to Cracker Barrel's first quarter fiscal 2020 conference call and webcast. This morning, we issued a press release announcing our first quarter results and our outlook for the 2020 fiscal year. On the call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran Senior Vice President and CFO, Jill Golder and Vice President and Principal Accounting Officer, Jeff Wilson. Sandy will begin with a review of the business, and Jill will review the financials and outlook. We will then open up the call for questions patients regarding the company's future operating results or expected future events. These are known as forward looking statements, which involve risks and uncertainties that in many cases are beyond management's control and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnished to the SEC. Finally, the information shared on this call is valid as of today's date, and the company undertakes no obligation to update it, except as may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Sandy Cochran. Sandy? Good morning and thank you, Adam. This morning, we announced positive comparable store restaurant sales, and we delivered GAAP earnings per share of $1.79. While we faced headwinds from the softening trend in industry traffic, comparable sales that continued throughout our first quarter, I was pleased that we again solidly outperformed the industry and that we grew operating income by 3%. Jill will review the financial results for the quarter as well as our updated full year expectations. But before she does, I want to speak to some of the highlights from the quarter and provide an update on our plans As a reminder, this signature fried chicken platform. The menu promotion also featured our new Homestyle Chicken BLT sandwich, and it was supported by 6 weeks of national TV media with the ad continuing our strategy of more explicitly highlighting our food and value. While traffic in the quarter was softer than expected, I was still pleased with the performance Moving to off premise. We again saw solid growth in this business and it was a meaningful contributor to top line results for the quarter. During the quarter, we expanded our 3rd party We also expanded our fleet of catering vans, bringing and we hired several catering sales managers as we continue to grow our catering business. Turning to retail, our sales in the first quarter were below our expectations and our apparel merchandise was particularly challenged. We continue to rework our women's apparel category as the guest response remained weaker than last year Additionally, we believe the unseasonably warm weather contributed to the underperformance of this category, particularly our outerwear offerings. As we look to the second quarter, Christmas seasonal merchandised sales such as Decor appear to be strong. But with the holiday gift purchasing season having just begun, we remain cautious regarding the shorter selling season and our teams are working diligently to address our sales concerns and remain committed to offering holiday products with strong price value relationships which we believe Looking ahead, we'll continue to execute accelerating our off premise business, driving top line growth through craveable signature food, enhancing the employee and guest experience, leveraging new long term growth drivers such as Maple Street Biscuit Company and Punchable social. I'm excited about our current holiday menu promotion which features the return of our country fried turkey topped with pan gravy served with green bean casserole and Cranberry relish. This offering proved to be very popular last year, and we believe platform that we installed as part of the Signature Fried Chicken Initiative helps to provide improved consistency. The menu promotion is being supported by an integrated marketing campaign that includes national TV. Second quarter is a key period of our off premise business. We've been pleased with the demand for our heat and cert offerings in recent years, and we believe the growth we've seen in this business reflects the trust that guests have in Cracker Barrel to provide a delicious home cooked meal during these special occasions. Continue to believe that these differentiated offerings, which serve up to ten people, are of good value, and provide the ultimate convenience for guests looking to host family and friends in their homes. This year, We also made several enhancements during this high volume how we can further expand our reach and frequency for this occasion. Lastly, we announced our acquisition of Maple Street Biscuit Company. Several years ago, when we are assessing opportunities in the fast casual space as part of our extend the brand strategy, Maple Street was a concept that stood out, and I have the opportunity to meet with Scott Moore, the founder and CEO. Since that time, we've been closely following and admiring Maple Street which continued to grow. Several months ago, Scott reached out and asked whether Cracker Barrel would be interested in acquiring Maple Street. He grown Maple Street to 28 company owned units and 5 franchise locations since opening in 2012. But he recognized that Maple Street would benefit from additional resources and expertise. While he was prepared to go through a full search process for prospective buyers. He preferred a trusted strategic partner with a long term perspective. Our brands share many values and similarities such as made from scratch cooking and genuine hospitality. Maple Street will be able to leverage Cracker Barrel's resources and expertise. We're committed to preserving the integrity of the Maple Street brand. Our experience with Holler and DASH has reinforced our belief that the breakfast and lunch focused fast casual segment is an attractive category. We believe Maple Street will serve as a growth vehicle that complements Cracker Barrel by accelerating our penetration in this segment. By providing increased exposure After closing the deal secute our plans, which includes the conversion of Holler and Dash into Maple Street. We expect the integration to last until the spring, and we look forward to accelerating growth in the months following the completion of the integration. We believe that Maple Street and Punchful social are 2 emerging brands that are positioned to become leaders in their respective categories and will serve as complimentary growth vehicles for delivering long term value We're very excited about the future for both of these brands and the value creation we believe they'll drive. The Maple Street team will be relocating to Nashville and punchable social continues to operate from its Denver headquarters led by Robert Thompson. Closing, slight softness in the industry and in our sales performance compared to Q4, I was pleased with the quarter. We continue to outperform the industry and our teams started the year off strongly and executing against our priorities for the fiscal year. Additionally, we completed the acquisition of Maple Street Biscuit Company, which we believe complements our strategic investment in punchbowl social and will drive long term value creation. Going forward, we'll continue to execute our plans to enhance expand the footprint and extend Lastly, I'm excited to announce that we'll be providing additional detail regarding our long term strategy at our Analyst Investor Day which will take place in late Good morning, everyone, and thank you, Sandy. I would like to begin by discussing our financial performance for the first quarter of fiscal 2020 and then our outlook for the 2020 fiscal year. But before we begin, I would like to note that we adopted the new accounting standard for leases at the start of fiscal year. While this does not have an impact on our income statement or cash flows, it did have a meaningful impact to our balance sheet as our total assets increased approximately $578,300,000 with $473,500,000 of the increase attributable to the addition of In this morning's release, we reported 1st quarter net income of $43,200,000 and GAAP earnings per diluted share of $1.79 compared to prior year earnings per diluted share of 1.96 Our reported earnings per diluted share included unfavorable impacts for the quarter of $0.11 related to transactional and integration expenses associated with the acquisition of Maple Street Biscuit Company and a $0.25 loss from the company's equity method investment in its unconsolidated subsidiary punchbowl social. For the quarter, we reported total revenue of $749,000,000, an increase of 2.1% when compared to prior year revenue of $733,500,000. Our restaurant revenue increased 2.7 percent to $607,100,000 and our retail revenue decreased point 4 percent to $142,000,000. Our total revenue increase was primarily driven by positive comparable restaurant sales and the net opening of 4 new Cracker Barrel locations Cracker Barrel comparable store restaurant sales in the quarter increased 2.1% as average check increased 3.6% and traffic decreased 1.5%. The increase in average check reflected menu price increases of approximately 2.3% and a favorable menu mix of 1.3%. The first quarter mix favorability was driven primarily by our signature fried chicken platform. First quarter comparable store retail sales decreased 0.9% with decreases coming primarily within our women's apparel and toys categories. Moving on to expenses. Total cost of goods sold in the quarter was 29.3 percent of total revenue versus 30.3% in the prior year quarter. Our restaurant cost of goods sold was 24.6 percent of restaurant sales, a 60 basis point decrease versus the prior year. This decrease was primarily due to lower levels our food commodity costs were approximately 0 point 2 percent higher in the quarter than in the prior year quarter, driven primarily by increases in dairy. Our retail cost of goods sold was 49.6 percent of retail sales compared to 51.3% in the prior year quarter. This 170 basis point decrease was primarily a result of higher initial margin and lower markdowns. Labor and related expenses were $263,300,000 or 35.2 percent of revenue compared with $258,200,000 or 35.2 percent of revenue in the prior year quarter. Other store operating expenses were $162,900,000 in the quarter, compared with other store operating expenses of $152,500,000 or 20.8 percent of revenue in the prior year quarter. This ninety basis point increase was primarily driven by planned depreciation increases related to our investments in strategic initiatives, a higher advertising expense to support our fall menu promotion and transactional and integration expenses associated with the acquisition of Maple Street Biscuit Company. Store operating income was $103,000,000 in the 1st quarter, or 13.8 percent of revenue compared with store operating income of $100,600,000 or 13.7 percent of revenue in the prior year quarter. General and administrative expenses were $39,600,000 in the quarter or 5.3 percent of revenue and included transactional and integration expenses associated with the acquisition of Maple Street Biscuit Company. This compared to G And A expenses of $38,900,000 or 5.3 percent of revenue in the prior year quarter. GAAP operating income was $63,400,000 or 8.5 percent of revenue compared with $61,700,000 or 8.4 percent of revenue in the prior year quarter. Net interest expense for the quarter was $3,600,000, compared to $4,300,000 in the prior interest income resulting from our lending to punchable social. Our effective tax rate for the first quarter was 17.7%, compared to an effective tax we paid $32,100,000 in dividends and repurchased shares totaling $14,200,000 which resulted in us returning We ended the fiscal point $6,000,000 at the prior year quarter end. Our total debt was $485,000,000 at quarter end. Before providing our fiscal 2020 outlook, I would like to speak to our acquisition of Maple Street Fiscuit Company. As we announced in October, we acquired Maple Street in an all cash transaction for $36,000,000. Maple Street is a strong brand with attractive unit economics, which include targeted AUVs of over $1,000,000, and targeted store level EBITDA over 17%. Current unit economics are below these levels, but we anticipate achieving the run rate for these targets shortly after we implement a staggered rollout of planned initiatives upon the completion of the integration. We believe Maple Street has strong growth potential. We are working the site selection strategy and refining our estimate for Maple Street's ultimate build out, and we plan to share additional detail at our Analyst and Investor Day in late June. Associated with this outlook as described in today's earnings release and in our reports filed with the SEC. Our fiscal 2020 earnings estimate continues to assume total revenue of approximately $3,150,000,000 to $3,200,000,000 We now expect Cracker Barrel's comparable store restaurant sales growth of approximately 2%. We continue to anticipate Cracker Barrel comparable store retail sales growth of approximately 1%. We continue to anticipate We continue to expect to Additionally, we plan to convert 6 of the 7 Holler and Dash locations to Maple Streets in the coming months. We continue to expect increased food commodity costs on a constant mix basis in the range of 2% to 2.5% for the fiscal year. We have locked in our pricing on approximately 45 percent of our commodity requirements for fiscal 2020 compared to approximately 50% be approximately flat compared 4%. We continue to project $11,000,000 to $13,000,000 in business model improvements resulting from sustainable cost savings. Taking these assumptions into account, we continue to expect full year operating income margin of approximately 9% of total revenue. We now project net interest expense resulting from our lending to punch full social and reflects our updated lending schedule to punch full social. We now anticipate an effective tax which assumes the renewal estimated loss from our equity method investment in Punchful Social. We continue to expect capital expenditures for the year of approximately $115,000,000 to $125,000,000 and depreciation of approximately 110,000,000 to $115,000,000. Our guidance implies an increase in fiscal 2020 EBITDA of approximately 1% to 3% compared to the prior year. Taking these new earnings per share between First, it includes an expected loss from our equity method investment in Punchville's social of approximately $0.80, which includes the following components. First, pre opening expenses and significant investments in corporate infrastructure to support growth. 2nd, expected unit closure expenses 3rd, updated business performance expectations. Our GAAP EPS estimate also includes transactional and integration expenses related to the acquisition of Maple Street, which we estimate will unfavorably impact GAAP EPS by approximately And with that, I will turn the call over to We will now session. Today's first question comes from Jake Bartlett of SunTrust. Please proceed. Thanks for taking the question. Sandy, I want to ask about the, on the lowered same store sales outlook for 2020 on the restaurant side. And I'm wondering what is driving that, whether it's the industry outlook that you talked about kind of being, less than you know, less strongly expected. Or whether it's some of your initiatives like maybe the follow through from the fried chicken launch, how the Homestyle chicken, ran, how it performed in the first quarter, anything you're seeing early on in the Thanksgiving selling season? All right, great. Thanks, Jake. I'm actually going to let Jill take that question. Yes, we did update our comp guidance to 2% from our prior guidance of 2% to 3%. This was primarily driven by the year to date industry performance, we continue to be pleased with our off premise performance and anticipate continue growth in that business. As we said in our prepared remarks, we believe we can still achieve our targeted off premise performance at 10% of sales at the end of this year. The Signature Fried Chicken platform has been performing well. To our expectations. And that includes the performance of our Southern Fried Chicken, the Homestyle Chicken, as well as the new Homestyle and BLT. But I do want to point out as we look at the guidance, it does assume that the industry improves from a current trend in the back half. Got it. And if we could maybe switch to the second quarter and initiatives that you have in the promotions that you're running. Do you expect any difference year over year in terms of marketing weights, for instance, for the fried turkey promotion. And I believe you're, you're increasing your heat and serve prices pretty, pretty sharply this year, again, as you did last year. I'm just trying to gauge your confidence that that's not going to have some pushback in terms of demand. Well, we did anticipate the impact on demand as we made the decision about pricing, which was made last spring. So impact, if any, on the demand is built into our guidance. In terms of the media, I would say that we do have some additional media this year. One of the things that happened to us last year We actually, I think, began to be concerned. We were going to run out of turkey. And so, this year, we were able to change our inventory, which gave us more confidence. So I think there's some additional, media being driven after Thanksgiving with the turkey message on it. But we continue to be excited about the Heat and Serve as well as our celebration meals, And of course, tomorrow, we're our 1st annual Macy's Thanksgiving day parade, debut is tomorrow with our float. And our tiny store, which is in New York, excuse me, Thursday, our tiny store, which was in New York this morning. Great. And then just last question, on the margins, Your restaurant level margins, you included the impact of the transaction integration costs I'm wondering, I believe the, you used to have a conference every other year by annual conference. Was that in the first quarter here, typically it's probably 30 to 40 basis points, or has that been pushed into another quarter? So, Jacob, there's a couple of things there. So yes, the transaction costs from Maple Street, of $0.11 was in the margins for cracker barrel, about 48% of that or so was in G And A. The remaining was in other operating expenses. And yes, we did have our conference this fiscal year. And that is in the second quarter. It wasn't the biggest impact in there. I'm sorry, in the first quarter, it wasn't the biggest that in there. Yes, we did have some other operating expenses around our investment in capital as well as the increase of the 2 weeks in advertising that we had in The next question comes from Alton Stump of Longbow Research. Hey, good morning, certain team. I just want to ask you, kind of, as you look at the overall competitive environment, kind of what you're seeing out there, is it getting more aggressive in the casual space? And kind of as a forward interview, is that going to continue or do you think we'll see things get a bit more rational over the course of fiscal year 2020? Well, we certainly believe that it has been more competitive. I think as the industry softened in recent months, the and it would appear the consumer shifted some of their discretionary spending away from casual diner, the reaction, that elevated the competitive pressure. And I think the reaction was a higher of promotional activity, which, we were certainly noticing in the first quarter to what degree that'll continue, I'm, I don't think I can comment on that, Alton, as Jill mentioned, we are assuming an improvement in the underlying industry trend in the second half of the year. Got it. Thanks Sandy. And then a kind of small question. Which I guess is for Jill. Just I just bought back shares, of course, in the quarter for the first time in a couple of years, but obviously have also done some acquisitions here recently. Kind of how do you view share buybacks as a tool kind of going forward next 18, 24 months That's a great question, Alton. As you know, we now have more flexibility for repurchasing shares. So that's another way that, as the board looks at capital allocation, we're able to provide value back to our shareholders So I think what I'd say is our overall philosophy about capital allocation hasn't really changed We continue to focus on investing in the business to drive sales and earnings and long term value creation. Secondly, we remain committed to our regular quarterly dividend. And then, we also this year, we declared a $3 last fiscal year. We declared a $3 special in June. And then as you've pointed out in the first quarter of this fiscal year, we repurchased about $14,200,000 in shares. And then we have other investments in future growth driving initiatives like our investment in Maple Street and Punchable. So I think the board will continue to look at all of our options in front of us in terms of how we drive long term value creation, but then share repurchases now become part of that mix. Got it. Thank you. Our next question comes from Gregory Francfort of Bank of America. Please proceed. Maybe just the first one, in terms of punchable social, Jill, I think you gave a breakdown of kind of what's the main components of that, but can you maybe talk about what was the delta from the old $0.50 to the current $0.80? Is that greater pre opening that you've had or is it just what was the driver of that $0.30? Thanks. Great. Thanks, Greg. So, as a reminder, 1, we have a non controlling stake in Central And Social. And we continue to believe it's a highly differentiated brand with significant growth potential. So remember when we gave our original guidance, of $0.50 loss That included the fact that PBS, Control Social, as store level, positive store level EBITDA, but it's offset by the pre opening expense that you mentioned and a G and A infrastructure that supports the future growth. So then the change was largely due to unit closure expenses. We closed the Fort Worth site, which we believed was a selection, site issue. And the cracker barrel team is partnering with the punch bowl team to leverage our expertise to help us improve our site selection process. And then in addition, we did lower it a little bit for our current thinking on updated business performance. Again, as a reminder, it's a new brand. Many of the stores haven't even been open, 3 years. So we're getting a fair amount of learning specifically around sales trends. There's a number of, sales drivers in this brand. We're entering new markets. So we're learning about how sales grow in new markets, how we ramp up in group and event dining, as well as the seasonality of the business. So these numbers may move around a little bit, but we'll provide as much information as we can. Thank you very much. And maybe just 2 others, one for Jill and one for Sandy. Jill, just on the retail margins, I know you guys are talking about being flat for the year, but you guys are seeing, I guess, a lot of costs you're able to take out of the margins have been very good. Can you maybe talk about what's what's been the biggest tailwinds or biggest drivers of that performance year over year and why that would be temporary versus ongoing? And then I had one last one for Sandy. Well, I think on the retail margins, I'll actually start on that. I think the team has done a really good job of trying to protect margin rate and dollars in an environment where we needed to, address sort of a variety of issues, but probably the biggest one for us this particular quarter was the tariffs. And we've done that through, designing the assortment, through evaluating alternative suppliers, working with our vendors share the cost. In some cases, changing our pricing. So our buyers work really hard continue to deliver unique fun nostalgic, great value items to our guests and to provide the appropriate level of profitability for our shareholders. Got it, got it. And then maybe just my last one is, I know you talked about a little bit in your prepared remarks, Sandy, but just can you maybe address, what are some of the big differences between Maple Street and Holler and DASH. And then what are the things that they're doing right that maybe Holler and DASH wasn't doing right and why this is kind of a better brand to bet on longer term? And then that's it. Thank you. So, there's a lot of similarity. They are biscuit entrees and menu that features comfort food. They're both fast casual open breakfast and lunch. Both sort of focused on an urban, suburban locations, targeting millennials and Gen Zs. I think our experience with Holler and dash re 4 star belief that the segment was attractive. They have had Maple Street's been around longer. Their brand is, we believe, has strong proven business model, attractive unit economics, high growth potential. So given their success and where we currently were in the Holler and Dash, path, we felt that the conversion of Holler and Dashes into Maple Street would accelerate our penetration in the category. Today's next question comes from Jeff Farmer of Gordon Haskett. Please proceed. Thanks. Just a couple more on punch ball. So when do you expect to see the concepts become neutral to EPS? So this is Jill. I think what I would say about that is, As we said, we expect the investment in Punchville this year based on equity method of accounting to be an approximate loss of $0.80 We're not providing guidance beyond fiscal 2020. We will certainly talk more about it on our Analyst Day in late June. But as we said, right now, given how we're learning about the brands, the team continues to refine their forecast for next year. So we look forward to sharing more in June. Okay. And then of the punchable units that are in the comparable store base, Is there a same store sales number that you guys have shared or are willing to share? Detail, around our investment and the performance of the Punchville brand, because it's a non controlling interest. So we're just providing the below the line method based on the equity method of accounting. Okay. And just a couple of quick, additional ones. So just following up the Heat and Serve questions, that was you guys didn't provide a ton of detail, but it was pretty clear that was a big same store sales driver last year in the fiscal second quarter. So with the growing popularity of that offering, I have to assume it gets more unpopular every year as people get familiar with it and the double digit price increase that was already mentioned, how impactful could that be to your fiscal second quarter same store sales number this year? Well, it's certainly going to be an important component of the Thanksgiving week. It's an offer. We're very excited about our guests are excited about it. We did have the price increase and some demand an increase in demand expectations built into our guidance But it is only an offer that's available for, 1 week before Thanksgiving. And then we do offer a Christmas seat and serve before, before Christmas. So it is just one component of the overall mix for the 2nd quarter I will say off premise, in general, though, is an important part of our 2nd quarter sales patients. And so in addition to the heat and serve, we're looking forward to growth in our celebration meals, as well as individual to go grow through both third party delivery and just, people coming into the restaurant and to pick up their meal. All right, that's helpful. And just one last one. So you delivered strong labor cost control, I think, for the 2nd consecutive quarter. Just curious sort of looking under the hood a little bit, what's driving that labor cost favorability and how sustainable is that as we move through the balance of the fiscal year? This is Jill. What I would say is the teams have done a really nice job managing through labor. Our operations team is focused on the back to the basics on how we forecast our sales and then appropriately schedule. So we were pleased with our overall labor performance. We'll say the wage inflation of 3.2%. Was a modest headwind for us. We expect for the year wage inflation to be 4%. So that'll become more of a headwind as we look forward. And then also within the labor line, we did see some favorability across a couple of other lines that helped to offset our wage inflation, primarily in pre opening labor and a little bit in store bonuses. The next question comes from Stefan Anderson of Maxim Group. Please proceed. Hey, that's Steven Anderson. Just wanted to talk about the quarter specifically. I want to get into the impact from Hurricane Dorian. Although there was not really a directive to the United States, there was that weekend in September, where there were a lot of evacuations, maybe some door closures. I wanted to see if you were able to get any color on the impact on overall sales. Thank you. Great. No, thanks, Steve. Hurricane Dorian, even though the actual impact wasn't as much as it was forecasted to be. It was disruptive to our business and certainly had impact on our traffic, especially as people were concerned that it was going to hit Florida. So What we don't know is how much it impacted people's travel plans. And as you'll recall, it was near an important holiday weekend for us, when it hits. So we definitely think that it had an impact, as a reminder, in the first quarter of the prior year, we had 2 hurricanes. So our best estimate is they relatively offset each other, but it was a little more difficult to analyze. All right. Thank you. And I wanted to also take a look at the commodities. You said that looking at last quarter, the decline is up 0.2%. But you're still keeping the full year forecast and want to see if you see any pressure points across your commodity complex? Great. So yes, in the commodities basket, in the first quarter, we benefited from wrapping on higher eight prices in the prior year. So that's the primary component that brought our commodities flat to the prior year. We have a little bit of that ramp in the second quarter. So we do expect to see commodities step up in the second quarter and then be slightly above 3% in the back half. The main drivers haven't changed. What we talked about in our previous calls. It's really beef, pork, and dairy that are the largest drivers of our commodity inflation. And as we mentioned, we've got approximately 45% of our commodity pricing is locked All right. Thank you. Our next question comes from Bob Derrington of Telsey Advisory. Please proceed. Sandy, as it relates to a punchable social, I think on the last conference call, you talked about the business and you were fairly excited about ultimately the experiential contribution that it could bring, along with Cracker Barrel. And at the time, you're talking about the smaller prototype that opened in Fort Worth, which ultimately has been closed. So what I'm just curious what was it that has changed within the perception of that store location, from the initial enthusiasm about that smaller prototype? So, we're disappointed that Fort Worth wasn't successful. And this particular case, we believe it was a site selection issue, more than a small box issue. And we're partnering with the, with the team at Punchbold to understand better all of the, the situation and to improve that process. But as Jill said, it's a young brand. There's going to be learnings we will continue to learn, continue to update the guidance, but we continue to believe that PBS has significant growth potential, and I think it's positioned to become a leader in the segment. Are you, I guess based on that experience, thinking that you may provide a little bit more, participation in some of the key decision making processes within Punchful. Well, I don't know if it'll be more than we had originally planned. The team out in Denver had, we'd always anticipated in areas like real estate, purchasing, some things like that that we would be able to add expertise And that's, one of the reasons we made the investment. State issue just to ensure that we understood what the learnings were in all the sites, including Fort Worth. Got you. Okay. All right. And to shift gears back to the old country store, you also talked on the last conference call about the the new menu that you've introduced there. And I think this menu now offers both essentially both breakfast and all attribution from the impact of that menu that has affected the sales guidance? Or just if you could help us with your initial impression of how that's being received at the store level? Yes, the dinner menu initiative is currently only in 70 stores and it doesn't I'm not sure what, when you said Brett All Day dining, oh, what you might be referring to is that the dinner menu now has a small category where we call out on the dinner menu that breakfast is available all day. And we actually offer on the dinner menu our most popular breakfast items. And we highlight that you the full breakfast menu is available if you ask the server. So that largely made it just easier for our guests, that wanted to order breakfast as well as easier for our servers who now don't have to put 2 menus down for the lunch dinner time and only one unless asked. We continue to be encouraged by the learnings we have in the dinner test, but we are continuing test and learn. The first changes from the initiative will probably launch or we're expecting to launch sometime next spring chain wide. So as we learn, we've been making modifications. So I think we've got one going in next week to the test stores. We'll have another round then after the holiday and we'll modify modify the dinner menu, but no, the learnings from the dinner menu didn't impact. I'll turn actually over to Jeff on how that might have impacted the sales forecast. Yes. So yes, Bob, this is Jill. On the sales forecast, really the big change has been the industry expectations. You might remember from when we originally gave guidance, we expected the industry to perform overall as it had performed in the prior fiscal year, which better than our recent current trends. On the new food introductions, specifically under the Signature Fried Chicken platform, We've been very pleased, that's certainly driving the mix favorability that you've seen and they've been featured in our advertising. And we been pleased with that performance as well, specifically around the Southern Fried Chicken, the Homestyle Chicken and the Homestyle Chicken VLT that was matured. Okay. That's helpful. What I was curious about is whether adding the breakfast to the all day, that dinner menu Sandy had hurt the check average as consumers shopped maybe at more lower price, possibly the breakfast items as opposed to the regular dinner features. Not currently seeing that. Okay. All right. That's good. And then last question, if I could. On the, the depreciation, when the first quarter, it was up about 15% year over year. Yet the midpoint of the guidance, Jill, I think only targets D and A up about 5%. So Should we anticipate that the essentially $28,700,000 in the first quarter is expected to be a reasonable run rate for the other quarters? That's kind of what your guidance implies. Yes. Just a second, Bob, we're taking a look. But I think we feel comfortable with our guidance. Some of that is where the Maple Street integration costs kind of fell. But overall, we feel pretty comfortable with our guidance. We've stepped down a little bit on our capital spending, so you're gonna see some of that start to roll off towards the back half. But Yes. And we did, Bob, this is Jeff. We did have some accelerated depreciation associated with the acquisition of Maple Street, that is affecting our depreciation number in the first quarter as well. The next question comes from Brett Levy of MKM Partners. Please proceed. Great, thank you. Good morning. A couple of clarifications and then just some bigger picture. You've talked about continued growth on Punchable social and now you had a closure. Should we still assume that the roughly 100 unit target you had in place still exists in how should we think about the makeup of a willingness to revisit the smaller prototypes? I think for now, you should assume that the guidance or that 100 store expectations still exists and we'll update you more at the Analyst Day in the summer. Got you. You talked about continued growth of to go on off premise, care to quantify what it was, the growth this quarter? Yes. We are verifying. I think we said it was was up over 150 basis points. We'll verify that, but, it was a significant contributor in the first quarter, 180 basis points. It grew as a percentage of the mix? Yes, it contributed that to same restaurant sales growth. Oh, that's the contribution to comps. Okay. With respect to November, I know you haven't given a guidance, a cadence, but could you care to do you care to share any color in terms of how you how you exited F1Q and started off F2Q? No, I guess wait, I would not. I don't have any additional color to add to what we've already disclosed. Got you. And then, I guess, a strategic question. You've talked about upgrading the POS systems. How many units do you have that in now? And theoretically, why did you decide to spend $14,000,000 on buybacks as opposed to use that free cash that you have in play? To maybe accelerate the integration now that you've already gotten past the equipment integration from last year? Thank you. Yes, that's a fair question. So as we've looked at the POS rollout, so first of all, we're currently in 130 stores. We expect to add an additional 40 in fiscal 2020. We're still really pleased with the new POS. It's an easier system. To use for the team members. The technology, we believe, enhances the employee experience. And then we think it'll be a foundation for some future cost savings. But I guess what I would say is it's not that easy to flip the switch in terms of rollout. So, we will talk about at Analyst Day more about what our rollout plans look like, but it wasn't a capital constraint that kept us from increasing the rollout. It's more a gistics. Is that helpful? That is. Thank you very much. Our next question comes from John Tower of Wells Fargo. Great, thanks. Just a quick clarification first, if I may. The $0.80 EPS headwind that you had mentioned related to punch full social that does not include the interest income from the loan. Is that correct? That is correct. So, the $0.80 represents our investment using the equity method accounting So the other two areas on the financial statement where you will see an impact from punch full social One is on the interest income, which benefits from our loan, to punch ball. The other is in the tax And the tax rate doesn't include this is just a straight up one line $0.80 headwind, tied to the loss. Okay. Great, perfect. And then could you quantify what the size of the loan is to punch ball right now? So, what we had said, you want to answer, I can answer it. Go ahead. So what we had said is, we were going to loan up to $50,000,000 in the near term. To date, we've loan $30,000,000 about $1,000,000 of that was last fiscal year, $16,000,000, to date so far. And our guidance contemplates that we'll loan the remaining $20,000,000, the rest of this in this fiscal year. Great. Thank you. And then just going back to the signature fried chicken platform, can you give us a little bit more in terms of what you're seeing around customer usage of this perhaps just to simply a percentage of mix of sales today? Or more importantly, what you're seeing around frequency of use of this platform, are you actually seeing customers come in more frequently to use this than what you've seen in other platforms in the past? Well, what I can say is that it's in line with that we're pleased with the mix, let me let me back up. So so when we put our signature for our chicken platform in started with the offer of Southern Fried Chicken, and that was the bone in offer for pieces of bone in fried chicken. Then we rolled our homestyle chicken, which is a boneless offering that used to be available only on Sunday. So we rolled that out as an everyday offer in the summer. And we added to that our fried chicken BLT, which we're pleased with that performance. Then in the holiday season, we are offering the fried chicken, excuse me, the fried turkey offer as our holiday offer, and we're pleased with the performance of that. We'll next be adding hand battered tenders. That'll probably be next fall at the earliest. So the investment in the platform was always intended to be a multiyear initiative, and we continue to be pleased with the results. Okay. Thank you. And then, yes, anything else on outside of the signature chicken platform for the balance of the year, either on the new product side that we should be thinking about or importantly also around advertising is there any significant changes in the advertising spend planned for the balance of 20.20? I know obviously 2019, you had a significant amount of spend in that fourth quarter tied to this launch. How should we think about advertising for the balance of 20. Yes. No, that's a good question, John. So the advertising, as we talked about, we've added some advertising in the first half more in the second quarter that kind of came out of the 4th quarter. So, it'll be close to parity within the third quarter, it to be lower in the fourth quarter. And then we haven't talked about what our advertising will feature yet kind of beyond what we're on air with right now. Okay. Thank you. This concludes the question and answer session. At this time, I would like to turn the conference back over to Sandy Cochran for any closing remarks. Thank you for joining us today. I'm encouraged by the start to the year and remain confident in our plans to drive continued performance. Wish you all a safe and