We are pleased to present the highlights of BJ’s Restaurants’ earnings call for the fourth quarter of 2024. The call took place on February 20, 2025, at 4:30 p.m. ET. The contents included prepared remarks, questions and answers, and participation from various callers.
The call was initiated by Rana G. Schirmer, the Director of Securities and Exchange Commission Reporting. She welcomed all participants to the conference call and webcast, where the financial results for the fourth quarter of fiscal year 2024 were discussed. The full earnings release can be accessed on the company’s website at www.bjsrestaurants.com.
During the call, it was emphasized that forward-looking statements were made in compliance with the Private Securities Litigation Reform Act of 1995. Investors were advised to exercise caution and not solely rely on these statements, as actual results may differ from projections. The company commits to updating or revising forward-looking statements if necessary, as mandated by securities laws.
We encourage potential investors to carefully consider their investment decisions regarding BJ’s Restaurants. The Motley Fool Stock Advisor team has identified top stock picks for investors to consider, though BJ’s Restaurants was not included in the list. The call proceeded with prepared remarks from Brad Richmond, the interim CEO, followed by Lyle Tick, the president, and Tom Houdek, the CFO, discussing the company’s performance and outlook for the upcoming year.
For a detailed discussion on risks associated with forward-looking statements, investors are advised to refer to the company’s filings with the Securities and Exchange Commission. The call concluded with an opportunity for questions and further discussion on the financial results and future strategies.
We want to take a moment to recognize the devastating impact of the wildfires in the Los Angeles area. Our heartfelt thoughts and prayers are with all those affected by these fires. We are immensely grateful for the heroic efforts of the first responders who have worked tirelessly under challenging conditions.
We also want to extend a sincere thank you to the leaders and team members of local restaurants who have gone above and beyond to support the first responders and local residents. They have provided meals, refreshments, and safe spaces for those affected by the fires, showcasing a remarkable spirit of generosity and community engagement. Some of our own team members have been directly impacted, with a few tragically losing their homes.
Our team member support fund, known as Give us Life, has provided assistance to these members during their time of need. This fund is fueled by voluntary donations from team members who contribute a portion of their paychecks. We are deeply appreciative of their generosity and support for the BJ’s family.
Shifting our focus to the fourth quarter, we are pleased to report significant progress reflected in our financial performance. Our comparable same-restaurant sales showed strength, margins continued to improve, and our cash flow remained resilient and growing. The potential for further enhancement in these key financial metrics is promising as we move forward.
Our initial phase of initiatives has seen substantial progress in a short period, bolstering my optimism for the future potential of the BJ’s brand. With early goals achieved, a strengthened foundation, and clear action plans in place, we are well-positioned for continued success.
Looking ahead, Lyle will delve into our brand positioning efforts and growth plans, while Tom will review our fourth quarter and annual results, along with our outlook for 2025. Before that, let’s quickly recap our fourth quarter financial performance.
During the quarter, our comparable sales grew by 5.5%, driven by strong guest traffic across all dayparts and channels, consistently surpassing Black Box benchmark levels. Margins improved, resulting in a record-high restaurant-level margin of 15.4%, and restaurant-level operating profit increased by 14%, reaching $52.9 million. Adjusted EBITDA for the quarter was $33.1 million, a 21% year-over-year increase, with an improved margin of 9.6%.
Despite making significant investments in brand positioning initiatives, we achieved substantial profit growth. Our work to strengthen the brand and business model in the fourth quarter has laid a solid foundation for future success. We are excited by the progress and energized by the opportunities that lie ahead.
We are thrilled to bring these fresh perspectives to life and have recently implemented some important leadership changes. The costs associated with these changes resulted in an increase of approximately 100 basis points in our G&A expenses for the quarter, but these costs are temporary and have mostly been resolved, with only a small amount remaining for the first half of 2025.
We conducted a comprehensive review of our restaurant portfolio and determined that no restaurants needed to be closed. We also reevaluated our new restaurant pipeline, applying a more refined set of criteria to ensure more consistent performance in our new restaurant openings. As a result, some sites were removed from our pipeline as they no longer met our revised criteria. These reviews were the main reasons for the charges related to asset disposals and impairments in the quarter. It’s important to note that these charges are noncash items and do not impact our restaurant operations.
Overall, Q4 was a strong quarter with significant progress in various areas. We want to express our gratitude to Lyle, our leadership team, and our 21,000-plus team members for their hard work and adaptability in achieving these results efficiently. Their efforts have established a solid foundation as we look ahead to 2025. Now, I’ll pass it over to Lyle to discuss our brand refresh and growth initiatives in more detail.
Lyle Tick — President and Chief Concept Officer
Thank you, Brad. Good afternoon, everyone, and thank you for joining us today. I’ve been in my role at BJ’s Restaurant and Brewhouse for five months now, and I am pleased with the progress we’ve made in boosting sales and traffic, as well as streamlining our operations for better efficiency. While there is still work to be done, we are defining our core strengths to drive differentiation and implementing initiatives for sustainable and profitable growth.
We are entering an exciting phase for the BJ’s brand, building on the positive sales and margin performance in Q4 while sharpening our focus for the future. Before discussing our future plans, I’d like to briefly touch on our Q4 performance. We are pleased with our sales results and progress in expanding our margins. We believe we can continue building on these initiatives in the short term to guide our future strategies.
The Pizookie meal deal and our holiday large party offering were well-received by guests, and our targeted marketing investments in key markets accelerated our growth. While performance across different geographies, days, and times of day was promising, our performance on weekends without promotions highlighted the brand’s potential and customer affinity. In terms of margin enhancement, our initiatives are aimed at improving efficiency and enhancing guest and team member experiences.
Our AI forecasting model has been instrumental in enhancing food preparation plans and labor scheduling, ensuring optimal staffing levels. We also examined our comped food and beverage offerings to streamline operations and improve overall guest experiences.
Issues typically arise from errors in ordering or preparation, leading to challenges for team members, subpar guest experiences, and decreased efficiency in restaurants. A major contributing factor is the complexity of entering items into our POS system and how they appear in the kitchen. To address this, we simplified the process for crafting margaritas, resulting in a 20% reduction in comped drinks and errors reaching guests. Additionally, we optimized takeout and delivery procedures on our kitchen display systems, boosting accuracy by 10%.
In terms of facilities and equipment, we implemented QR codes on critical equipment for better maintenance tracking and cost savings. Preventative maintenance programs for key kitchen and HVAC units have also been established, leading to fewer breakdowns and reduced repair costs. These proactive measures are proving beneficial, with ongoing efforts to identify further simplification opportunities.
Regarding menu strategy, we are reassessing our value offerings and promotional platforms to cater to different guest preferences while ensuring a consistent dining experience. Extensive brand research has helped us refine our brand positioning to align with consumer needs and strengthen our market presence.
Moving forward, our focus lies on sustaining profitable growth through four key priorities: enhancing the team member experience, elevating our handcrafted menu offerings, delivering exceptional hospitality, and maintaining a vibrant atmosphere. We place great importance on retaining talent, as reflected in our below-average turnover rates and the positive impact of experienced managers on restaurant success.
Our team is dedicated to positioning the BJ’s brand for long-term success by emphasizing these strategic priorities and leveraging our strengths to drive continued growth.
Our research and feedback from team members show that we have an opportunity to consistently improve our hospitality. To achieve this, we are focusing on two key areas in the short to medium term: simplification and training.
In terms of simplification, there are two main aspects. The first is addressing task saturation. Our teams are dedicated to delivering exceptional guest experiences, so we are working on identifying and eliminating tasks that do not add value to our guests or hinder the efficiency of our managers and team members. The second part of simplification involves streamlining our processes and systems. We are currently simplifying our POS and kitchen display systems, optimizing how items are processed and communicated in the kitchen, with positive results already evident.
Turning to training, both managers and team members have expressed a need for better support in this area. Finding the right balance between technology and hands-on training is crucial. While digital training has become more prominent, our team members have emphasized the importance of hands-on training. In response, we have introduced new team member and manager training programs that combine digital modules with interactive sessions, receiving positive feedback. This approach has helped new team members integrate quickly, feel part of the community, and excel in serving our guests.
Our second strategic priority is enhancing our handcrafted food and beverage offerings. Through brand research, we have identified core menu items with strong brand equity and emerging opportunities. Our focus is on making strategic decisions to differentiate our offerings while ensuring consistency and simplification. Core items such as pizza, Pizookie, and craft beverages have strong brand associations, while other items like wings, steaks, and slow roast present opportunities for growth.
We are committed to optimizing our menu by emphasizing high-margin offerings and innovating in our core platforms. By streamlining and innovating, we aim to provide exciting choices for our guests while maintaining profitability. Our third priority is delivering exceptional hospitality, a cornerstone of the BJ’s brand. Through ongoing efforts and focus in these areas, we are confident in our ability to elevate our guest experience and drive success.
Our loyal guests consistently return to experience our exceptional hospitality. Our focus is on empowering our managers and team members to deliver outstanding service to guests, whether on-premise or off-premise. On-premise, we prioritize having the right staff in the right positions at the right times, utilizing AI forecasting and labor scheduling to enhance efficiency. By streamlining operations and identifying peak hours, we aim to consistently provide our BJ’s WOW experience. For off-premise, we strive to create a seamless end-to-end experience, optimizing our product offerings and enhancing the journey from order placement to fulfillment.
Furthermore, we are committed to maintaining a fresh atmosphere at BJ’s, a key aspect of our brand identity. Our plan for 2025 includes remodeling existing locations and opening a new restaurant in Queens Creek, Arizona. We are excited about the growth opportunities and are focused on maximizing our return on investment by analyzing recent successes and refining our new restaurant pipeline.
Looking ahead, we are enthusiastic about BJ’s future unit growth and remain dedicated to keeping our stakeholders informed as we progress. We are encouraged by the insights gained from brand research, feedback from operators, and past performance, which fuel our confidence in our strategic direction. Thank you for your support, and now I will pass it over to Tom to discuss our fourth quarter results and outlook for 2025.
In the last quarter, we achieved an adjusted EBITDA of $117.1 million, representing a 13% increase from the previous year. Sales for the fourth quarter amounted to $344.3 million, a 6.4% rise from the prior year. Comparable restaurant sales saw a 5.5% increase in Q4, largely due to a surge in traffic. This quarter marked our best performance since 2018, excluding the COVID recovery period, as our sales initiatives drove growth in sales, traffic, and market share. Our comp sales outperformed the industry by 3.7 percentage points, with traffic beating by 6.8 percentage points according to Black Box. The success can be attributed to promotions like the Pizookie meal deal and strategic marketing efforts to enhance brand awareness. Additionally, limited-time offerings such as the Spooky Pizookie and Grand Cru Belgian ale anniversary contributed to guest excitement.
Our restaurant-level cash flow margin improved to 15.4% in Q4, up by 100 basis points from the previous year. Leveraging strong sales, we achieved better margins while investing in food and marketing expenses. Restaurant-level operating profit surged 14% to $52.9 million, marking our most profitable Q4 ever.
Looking ahead, we aim to sustain margin growth through various strategies. Adjusted EBITDA for the quarter was $33.1 million, equivalent to 9.6% of sales, showing a $5.8 million increase from the prior year. Net loss for the quarter was $5.3 million, primarily impacted by exceptional items such as loss on disposal and impairment charges, warrant extension costs, and leadership transition expenses. The increase in loss on disposal and impairment of assets was due to a review of our existing restaurants and future sites, resulting in impairments and upgrades to our menu.
Adjusted diluted net income per share grew 5.1% to $0.47 compared to $0.45 per share last year. Notably, cost of sales increased to 25.9% in the quarter, with food cost inflation of approximately 3.5% year over year. Labor and benefits expenses improved to 35.8% of sales, while occupancy and operating expenses stood at 22.9%, both showing favorable trends compared to the previous year.
Overall, our restaurant teams excelled in delivering strong results, enhancing operational efficiency, and driving sales growth while maintaining high guest satisfaction.
In the previous year, we saw gains from our cost-saving efforts and from increased sales leverage. Despite investing 50 basis points in additional marketing, which effectively drove more traffic to our restaurants, we achieved overall gains. In the fourth quarter, our General and Administrative (G&A) expenses totaled $23.7 million. This included costs of $2.1 million for accelerating our brand positioning work and $1.5 million for leadership changes. Excluding these costs, Q4 G&A was about 1% lower than expected. During the quarter, we repurchased approximately 234,000 shares of common stock for $8 million.
Our board of directors has approved a $50 million increase in our share repurchase program, with around $83 million still available. At the end of the fourth quarter, our net debt was $40.4 million, down by $7.7 million from the previous quarter. Our 2025 financial outlook anticipates a 2% to 3% increase in comparable restaurant sales for the full year. This forecast considers various third-party forecasts and our internal growth drivers, factoring in recent softer sales trends due to weather and consumer spending habits post-holidays.
Moving forward, we expect positive comp sales and traffic in Q1, with a slight moderation in the sales growth rate. Our full-year guidance includes expectations for restaurant-level operating profit of $205 million to $215 million and adjusted EBITDA of $127 million to $137 million. We plan to open one new restaurant and remodel up to 30 existing locations in 2025, with capital expenditures ranging from $65 million to $75 million.
By the end of 2025, about 60% of BJ’s restaurants will either be recent prototypes or have been refreshed in the past four years. Our capital spending for future restaurant openings will depend on the pace of development and alignment with our new location criteria. Lastly, we anticipate repurchasing $40 million to $50 million of shares in 2025, supported by our increased repurchase program.
We are pleased with our fourth-quarter results and the progress we have made in establishing a strong foundation for sustainable and profitable growth. Our clear sales and profit growth strategy, along with the strong consumer appeal of the BJ brand, position us well to continue our success. With a focus on enhancing shareholder value, we have strong cash flow, expanding margins, and a healthy balance sheet, enabling us to execute various initiatives.
Thank you for your time. We are now ready to address any questions. Operator, please open the call for questions.
Operator: We will now begin the question-and-answer session. Our first question is from Alex Slagle with Jefferies. Please go ahead, Alex.
Alex Slagle: Congratulations on the progress. Can you provide clarity on the restaurant-level profit guidance and margin implications, considering potential revenue growth and unit expansion?
Tom Houdek (CFO): Thank you, Alex. Looking ahead, we anticipate margin expansion across various categories, including food costs, labor, and O&O. We expect some reinvestment to drive traffic and industry outperformance, leading to overall margin improvement.
Alex Slagle: How do you plan to address pricing and inflation concerns to maintain profitability?
Tom Houdek (CFO): We will adjust pricing to offset inflation while focusing on driving traffic through value offerings and strategic menu shifts. Pricing will play a role, but our initiatives and focus on margin improvement will be key drivers.
Brad Richmond (Interim CEO): We are committed to maximizing profitability by remaining agile in our margin management strategies. Our goal is to increase absolute profitability while exploring various avenues to achieve this goal.
Thank you for the insightful questions, Alex.
The focus of our decisions is driven by the absolute dollars we can generate, particularly when considering our unit economics, which involve large box sizes and high average unit volumes (AUVs). As evidenced in the fourth quarter, even a small increase in sales can have a cascading effect on our profit and loss statement. Although this may not be as noticeable in terms of food costs due to current cost structures, the key takeaway is that we have plenty of opportunities to optimize our performance. We are committed to maintaining flexibility, continuously learning, and adapting to market dynamics. Our guidance for the year reflects our confidence in achieving our targets, with room for updates as the year progresses.
Regarding marketing, we are still in the learning phase following a successful fourth quarter. Our marketing efforts yielded positive results in both media and non-California markets, indicating potential for further growth. Moving forward, we will continue with a targeted approach, focusing on enhancing performance in key markets while remaining mindful of efficiency. We are exploring alternative channels such as connected TV and digital platforms to maximize our reach and engagement with our target audience.
In terms of delivering value, our success with promotions such as the Pizookie meal deal in Q4 validates our ability to provide value to customers. We will continue to evaluate and refine our offerings to ensure we are meeting customer expectations and driving value across fiscal ’25.
25? Are we looking to replicate the success of Q4 in a continuous manner? Are there other strategies we can confidently implement that would have a similar impact as the Pizookie meal deal? – Lyle Tick, President and Chief Concept Officer
Thank you for the question. It’s a multi-faceted answer. We are pleased with the performance of the Pizookie meal deal and the positive traffic it has generated. We have observed a halo effect on non-Pizookie meal deal categories, with some unit growth in other areas as customers visit and order a mix of items. The marketing efforts have also extended into the weekend, driving awareness even when the deal is not active. We believe there is more potential with the Pizookie meal deal.
Additionally, we plan to review our overall value strategy and promotional platforms to capitalize on what is working well and phase out less effective initiatives. I believe in the value equation, which encompasses the overall experience we offer in terms of food and service, not just the price. We aim to cater to guests seeking everyday value, like the Pizookie meal deal, as well as those looking for premium dining experiences. By satisfying both ends of the value spectrum, we can ensure all guests feel they are getting value for their money.
In terms of the impact of external factors such as weather and the California fires on our sales performance, I believe the weather-related disruptions have slightly impacted our results in February, but we expect this to improve as we progress through the quarter. These factors have likely affected our sales by over 100 basis points for the full quarter. We are monitoring the situation closely to mitigate any further impact. – Tom Houdek, Chief Financial Officer
If you have any more questions, feel free to ask.
There are no significant updates to report regarding the California-specific area, except for the positive efforts made by our teams in supporting the communities. While these efforts won’t have a major impact on the quarter’s results, we are focused on overcoming weather-related challenges to return to our normal operations. In terms of menu simplification, we are considering streamlining our offerings by removing items that do not contribute significantly to our brand identity or financial performance. This will create space for more innovative menu additions and keep our core offerings fresh. We do not have a specific number of items targeted for removal yet, but we anticipate starting this process in the second half of the year during planned menu updates. This will allow us to enhance guest experience and operational efficiency. As for service levels in our stores, we aim to maintain high standards and may explore reallocating labor hours to the front of the house if needed.
We have been successful in differentiating our brand through excellence, but we need to ensure consistency across all occasions. Simplifying processes, reducing task saturation, and enhancing training for our team members are key priorities to enable them to consistently deliver great experiences. Our focus is on optimizing labor allocation, ensuring the right people are in the right place at the right time based on data insights. While we may need adjustments during peak periods, overall, we are not looking at a significant increase in labor costs, but rather a strategic reallocation for effectiveness.
Brad Richmond, Interim CEO, highlights the importance of optimizing hourly labor to drive performance. Cutting costs should not compromise service quality, and by leveraging tools and insights, we can strategically allocate labor for better outcomes. The positive impact of our efforts is evident in increased consumer satisfaction scores, which bodes well for future performance. We believe in investing wisely in labor rather than solely focusing on cost-cutting measures for profitability.
In the discussion with analysts, the focus is on brand positioning and the strategic approach to labor optimization for sustainable growth and customer satisfaction. The company aims to strengthen its position through effective resource management rather than solely relying on cost-cutting strategies.
The primary motivators influencing customer visits to BJ’s have historically been pizza and beer. These items have long been associated with the brand, particularly in California where pizza is a significant traffic driver. However, outside of California, while pizza remains a strong association, it is not as dominant in driving footfall. Recognizing the importance of these core offerings, we are focusing on enhancing customer satisfaction through improvements in our pizza platform. Additionally, our pizza menu plays a key role in driving group traffic occasions, resulting in favorable check sizes and margins.
Regarding consumer trends, we have observed resilience among our core customer base of 100,000-plus households, outperforming the industry average. While there may be some softness among households with lower incomes, overall consumer behavior has not undergone significant changes in the first quarter of 2025. January was a particularly strong month for us, demonstrating the continued appeal of our offerings to consumers.
At the end of our guidance, even with the shift in the New Year’s calendar, February was the month where we observed a more significant impact from weather conditions. At this point, it is challenging for us to pinpoint the consumer as the primary driver based on the data available.
Barclays Analyst Sharon Zackfia: Thank you.
Operator: The next question is from Brian Bittner with Oppenheimer and Company. Please proceed.
Oppenheimer and Company Analyst Mike Tamas: Hi, thank you all for your hard work and impressive results. Regarding the transition from restaurant-level profit to adjusted EBITDA guidance for 2025, are you anticipating a flat or slightly decreasing trend in G&A expenses? Could you elaborate on this aspect? Thank you.
Chief Financial Officer Tom Houdek: Thank you, Michael. Yes, in comparison to 2024, there were certain one-time expenses in our G&A, particularly in Q4, related to additional consulting for brand positioning and leadership changes. Therefore, we are expecting a modest decrease in G&A year over year.
Oppenheimer and Company Analyst Mike Tamas: Thank you for clarifying. Additionally, Tom, could you confirm if the 2nd and 3rd quarters are projected to mirror the 1st quarter’s performance, excluding any weather-related challenges? If the 1st quarter comp was 2% and we exclude the 100 basis point weather impact, are we looking at around 3% for those quarters?
Chief Financial Officer Tom Houdek: Yes, that is a reasonable interpretation of the quarterly performance. We anticipate a similar seasonality trend in these quarters, with Q2 typically showing the highest restaurant-level cash flow percentage due to key events like Mother’s Day and Father’s Day.
Operator: Thank you. The next question is from Jeff Bernstein with Barclays. Please go ahead.
Barclays Analyst (Pratik): Thank you for accommodating us. I would like to inquire about your real estate pipeline strategy and any changes in criteria for new unit openings. Looking ahead to 2026 and beyond, are you planning to focus on existing market expansions or targeting new markets? Any insights on your growth strategy would be appreciated.
Following up, thank you. Lyle Tick, President and Chief Concept Officer here. We have completed a study and refined specific criteria for evaluating our unit pipeline and replenishing it. Your question hit the nail on the head. In the short term, our primary focus will be on brand awareness and human capital. We are looking at markets where our brand is already well-known or growing and where we have a strong management and team presence. These are the markets where our restaurants perform exceptionally well. So, our immediate strategy is to concentrate on existing markets with a strong brand presence rather than expanding into new markets at this time. Examples like Tracy, California, Cypress, Texas, and upcoming Queens Creek, Arizona highlight the success of this approach. However, in the medium to long term, we will explore new markets as we believe in the brand’s potential and reception in those areas. While new markets offer growth opportunities, they typically take longer to reach full potential compared to existing markets. We see infilling in current markets as a way to bridge awareness and consideration gaps, especially outside of California.
Barclays analyst: Understand, thank you for the insights. Just one more question for Brad. You’ve been in your current role for about six months now. Can you share any initial surprises or significant opportunities you’ve identified for future value creation?
Brad Richmond, Interim CEO: Certainly. I’ve been pleasantly surprised by the health of our brand and business model, providing a strong foundation for growth. Our large restaurant sizes offer great potential for increased unit volumes, which we are actively exploring with the leadership team. We are identifying key opportunities for growth and developing strategies to pursue them effectively. I see enormous potential for our brand to evolve from good to great, building on our existing strengths. With the right focus and execution, I am optimistic about the future of our brand and business.
That is greatly appreciated, and congratulations, guys, on a strong result.
Operator: Thank you. This marks the end of our question-and-answer session. [Operator signoff]
Duration: 0 minutes
Call participants:
Rana G. Schirmer – Director of Securities and Exchange Commission Reporting
Brad Richmond – Interim Chief Executive Officer
Lyle Tick – President and Chief Concept Officer
Tom Houdek – Chief Financial Officer
Alex Slagle – Analyst
Todd Brooks – Analyst
Brian Mullan – Analyst
Sharon Zackfia – Barclays – Analyst
Mike Tamas – Oppenheimer and Company – Analyst
Unknown speaker – Barclays – Analyst
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