Good afternoon, everyone and welcome to the Red Robin Gourmet Burgers, Incorporated Third Quarter 2018 Earnings Call. Please note that today's call is being recorded. During the course of this conference call, management may make forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and therefore are subject to risks and uncertainties as described in the Safe Harbor discussion found in the company's SEC filings. During the call, the company will also discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles, but are intended to illustrate an alternative measure of the company's operating performance that may be useful. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the third quarter earnings release. The company has posted its fiscal third quarter 2018 earnings release and supplemental financial information related to the results on its website at www.redrobin.com in the Investors section. Now I'd like to turn the call over to Red Robin's President and CEO, Denny Post.

Thank you, James. Good afternoon and thank you all for joining us today so we can share with you our results, our progress and our in-quarter plans. Here with me at the Red Robin Home Office is Guy Constant, who is our Chief Financial Officer until we hire his replacement and he is free to move fully into his new role as Executive Vice President and Chief Operating Officer. Guy and I have been working closely with the tenured field leadership team over the past few months to gear up for the high volume seasonal sales period ahead. When we spoke with you all last, we shared our learning about service and marketing opportunities we had identified as the key drivers of our dine-in traffic trends. As I will speak to later, in order to focus operators on these service opportunities, we chose to shift some media weight out of the third quarter. As expected, dine-in sales and traffic slowed. At the same time as shown on slide 4, our off-premise businesses of carry-out delivery and catering continued to grow at a healthy clip. However, as shown on slide 5, this new channel growth was not sufficient in Q3 to maintain the year-over-year overall traffic outperformance we have delivered for eight consecutive quarters. That said, cut to slide 6 and you'll see that on a two year stack, we were still 250 basis points above competition, who continue to ratchet up dealing and advertising spending in pursuit of positive traffic. We do not blame the competitive environment for our shortfalls. Instead, we are focused on those things that are within our control; understanding root causes and changing operations and marketing approaches to bend the trend. The first place that we delve deep was on our service standards. In our race…

Thank you, Denny and good afternoon everyone. As I walk you through the highlights of our financial results for the third quarter, please note that the numbers I present are on a recurring basis excluding special charges. Q3 total company revenues decreased 3.5% to $294.9 million, down $10.8 million from a year ago. Comparable restaurant sales declined 3.4% driven by a 1.5% decline in average guest check and a 1.9% decline in guest traffic. Mix decreased 3% primarily driven by heavier guest usage of our Tavern value menu and lower beverage mix, both alcoholic and non-alcoholic. Overall price after considering the impact of discounting increased to 1.5% in the quarter. Tavern mix increased to 17% in Q3 up from 13.2% a year ago. Third quarter restaurant level operating margin was 16.8% down 180 basis points versus a year ago driven by the following factors: Cost of sales was flat versus a year ago at 23.8%, increases in steak fry cost and the impact of higher Tavern mix were offset by favorability in ground beef and reductions in food waste as measured by actual versus theoretical performance. Restaurant labor costs were also flat versus a year ago at 35.3% as improvements in hourly labor productivity were offset by sales deleverage. Other operating costs increased 120 basis points to 15% due to increases in restaurant technology costs, repairs and maintenance expense, third-party delivery fees, higher utility costs and supplies. Occupancy costs increased 60 basis points to 9.2% primarily due to sales deleverage. General and administrative expense improved by 40 basis points to 5.7% due largely to the home office reset that was completed in late January and a lower incentive and equity compensation costs. Selling expenses were lower by 90 basis points as a percent of revenue to 4.1% consistent with Denny's…

Thanks, Guy. As a team we are all-in to turn the tide on our business. I have been here long enough to see highs and lows and to see how this team responds when we hit rough waters. We have a track record of identifying issues and putting solutions in place to resolve them. Resilience is one of our core competencies along with accountability. By exercising both to the fullest, I am confident we will turn this around without losing sight of our long-term vision for Red Robin to evolve to meet the needs of generations to come. With that, let's take questions.

Thank you. And we'll take our first question today from John Glass with Morgan Stanley. John Glass - Morgan Stanley & Co. LLC: Thanks very much. First Denny, can you just review the decision to reduce your – hi. Can you hear me okay?

Yes. We can.

We can. John Glass - Morgan Stanley & Co. LLC: Okay. Good. I'm sorry I'm working remote. Can you just review the decision to reduce advertising. Is that the decision made intra-quarter, was that's planned maybe we didn't know about it, is it come back in the fourth quarter or do you reduce it or continue to reduce level the fourth quarter versus a year ago or maybe what is the reasons behind that decision?

So it was made intra-quarter. It was not known at the time that we last spoke with you and it was decided specifically to clear the decks a bit for us to focus on the service operation issues and retrain the team, John. You know as you know Q3 is one of our traditionally lowest volume quarters of the year, so as it goes the risk there was relatively better. We have taken – it was about 15% of our total media and quarter which is we don't spend a lot. So 15% out is a bit of last couple weeks' total, I think, between our local and national media and we did take most of that into Q4 to try to support coming back around the peak to peaks and our opportunity to really drive when the season is hot. So we will have more media weight in Q4 than we had before, than we had last year; year-over-year. That answer your question? John Glass - Morgan Stanley & Co. LLC: It did, yes.

Okay. John Glass - Morgan Stanley & Co. LLC: Can you talk a little bit about the Tavern Double menu. You talked about mix being not as negative but I mean your total mix was worse than last quarter. So maybe you meant like on that menu it was less of a drag or so maybe just amplify what you meant by that. And what modifications have you made to that menu? It seems like there's been some changes, discussion last quarter of changing the composition of that so that you didn't have as much trade down as you experienced last quarter?

Yeah. It's a great question and thanks for the opportunity to clarify it, John. Our Tavern mix declined through the quarter. So as we came off air, as we shared we made that decision to pull some of that media weight out at the end of P10, we saw our mix go from a high of 17.3% to 16.4%, still higher than we traditionally have been but it was a good opportunity for us to cut some of the mix drag we've been seeing. That also informed our PPA management for Q4. So in Q4 there are only two Taverns currently, the new Haystack and the original Red's Tavern Double at $6.99. The other three that we've launched over the last couple of years the Taco, Cowboy Ranch and Smoky Jack are now $7.99, one of which has been there before. So we know kind of what to expect there. And we're managing overall the menu everywhere from $6.99 to a top of $8.99 for the Pig Out which has been on our menu for quite some time. So we've really pulled out the pricing on Tavern from a low of $6.99 up to $8.99. John Glass - Morgan Stanley & Co. LLC: Okay good. Thank you.

Thank you, John.

Next we'll hear from Gregory Francfort with Bank of America.

Hey, guys, I have a couple of questions.

Hey, Greg.

Denny you talked about – Hey, Guy. You talked about some of the metrics that were soft last quarter starting to improve this quarter. When did those metrics start improving? Was that sort of partially through the quarter and have you continued to see improvement since?

I'll turn that to our soon to be Chief Operating Officer to answer.

Hey, Greg. Yeah. We saw the improvement in the metrics start right around the time that we brought people in to start the training, that we did early in September and then had the follow-up event in October that Denny referred to in her comments. So the attention on the metrics themselves of course started some of the movement as it would typically do. And then rather than have that just be a factor of increased attention, we actually wanted to embed the skills associated with keeping those and sustaining those as they've gone on. And we've been pleased by the movement that we've seen in that area in really all of those four metrics from wait times, to walkaways, to guest complaints, to ticket times. Some of those, you might expect, would improve simply because of the lower volumes you see in the third quarter but we've also seen year-over-year improvements in some of those metrics which is encouraging. Obviously, the proof is going to be in the pudding here as we get into the higher volume fourth quarter if the pre-work that we've done and the reps that we've had will result in the ongoing improvement that we hope to see.

And then just maybe a broader picture question. You've had some reorganization savings on the G&A side. You're cutting back labor in certain areas. What sort of comp do you think you need to kind of keep EBITDA flat next year? Is it sort of flat to 1%. Is it higher than that given some of the overall inflationary pressures? What sort of level would you expect you would need?

Well, we've experienced improvements in absolute dollars as we've gone through the year. So this year if we'd had flat comps this year, we'd have seen margin improvement without a doubt simply because some of the heavy lifting that we've done during the year on labor productivity in G&A, as you mentioned. As we move into next year, while there are some additional opportunities for labor productivity, we won't quite see the same sort of benefit in absolute hours that we saw this year. So I would think we would need to do a little bit better than flat comps in order to leverage margins, but we're not without opportunities to still address some areas. So I don't think we need low to mid-single-digit comps. I would just say we'd need slightly better than flat.

Understood. Then maybe the last question is just, at the current stock price, I mean I think you own 36 properties. Have you thought about monetizing those? And I guess if not, why not? And are there any restrictions to doing that and then that's it from me? Thanks.

No. I mean, we've certainly looked at all the options to improve the business. One of the challenges when you do that kind of sale leaseback, Greg is if you're going to get any of the kind of proceeds that you'd like to get, you generally have to sign up for very long lease terms in order to secure that. And often, a lot of the real estate that we own as casual diners is older real estate or real estate under older locations because you don't buy as many properties or at least the industry hasn't in recent years. And so, what you're doing is you might be taking a 10- or 15-year old property and signing up for a 20-year lease. And we're about managing the business for the long-term and that would severely limit our flexibility to exit some of those locations as the trade area might move away in future years. So we balance that against the proceeds we can generate and at least right now we haven't been willing to make that trade-off, but we're always going to keep our options open.

I was going to say our real estate team now that we're not focused on new restaurant openings is very focused on optimizing our portfolio and we're always looking at those kind of opportunities as well as how to drive occupancy cost down.

Understood. Thank you.

Thanks, Greg.

Thank you.

Next we'll hear from Jeff Farmer with Gordon Haskett.

Great. Thanks.

Hey, Jeff. Welcome back.

Thanks very much. Your labor productivity looks like it improved. It was 12% in the 2Q. I think it was roughly 8% in the 3Q, you're lapping Maestro. So I'm just curious what level of labor productivity you think you're going to see as you move through the fourth quarter into early 2019?

Yeah. The improvements in productivity Jeff were fairly evenly split between the Maestro change and the team service change we made in the first quarter. So I would expect about half of that productivity impact to be affected by the lap.

Okay. And then there seems sort of ballpark your question or ballpark of questions. You touched on this earlier, but in terms of the labor productivity that might be needed to offset some pretty material wage rate inflation, that you and a lot of other West Coast companies are looking at in 2019 and 2020. What level of productivity would essentially get that covered for you?

We've seen, in this last quarter, while we saw the productivity you talked about we've seen wage rates go up about 3%. So wage rates while still up and that's not an immaterial number, they actually have not gone up as much as we were expecting at the start of the year. So that's been a bit of the benefit. And so a lot of the work that we've done Jeff, we feel like as Denny mentioned in her remarks, puts us in a really good position to drive good flow through when we can get the sales turned to where we want to do where we want to be. And so while negative sales has perhaps masked some of that benefits as we've gone through the year, I do think we're well-positioned versus the space because of that hard work that we've done over the past year.

Okay. That's helpful. And just final question on the tax rate. I appreciate this is very challenging to answer this question, but could you potentially see, again a tax benefit role into 2019 even with a modestly positive comp the way this is set up?

I think it's possible. I mean as you know, Jeff having followed this space for a long time as you have that tax rate moves with earnings in our business. So, we always hope to be paying a higher tax rate that would mean that we're having a better year earnings wise, but given the magnitude of the credit that we've had, it's possible that our tax rate would be perhaps in the single digits next year even if we're able to drive earnings and if we're not as successful, it could be a benefit.

Okay. Thank you.

Next we'll hear from Chris O'Cull with Stifel. Mitch Van Zelfden - Stifel, Nicolaus & Co., Inc.: Yeah, hi. Good afternoon, guys. This is actually Mitch on for Chris.

Hey, Mitch. Mitch Van Zelfden - Stifel, Nicolaus & Co., Inc.: Just looking at the dine-in traffic figure in the quarter, with growth in the off-premise channel also driver of that decline in addition to the marketing shift you alluded to, just curious if you think that channel is cannibalizing a bit? Thank you.

We still haven't seen any evidence of that, Mitch but it's a trade out from that standpoint. I think overall we feel like most of the dine-in traffic decline has been more about our difficulty in seating and turning tables appropriately which is why we're so focused on that for Q4. Mitch Van Zelfden - Stifel, Nicolaus & Co., Inc.: Great. Thanks, guys.

Thank you.

We'll now hear from Brian Vaccaro with Raymond James. Brian M. Vaccaro - Raymond James & Associates, Inc.: Thank you, (00:29:09).

Hi, Brian. Brian M. Vaccaro - Raymond James & Associates, Inc.: Hey, Guy. Just circling back on Jeff's question, what tax rate is assumed in your updated adjusted EPS guidance of $1.60 to $1.80?

For this year? For the balance of this year, we would expect to see benefit again. Brian M. Vaccaro - Raymond James & Associates, Inc.: For the fourth quarter – yes.

Yeah. We would expect to see a benefit again in the fourth quarter, yeah. Brian M. Vaccaro - Raymond James & Associates, Inc.: Okay. And circling back on some of the metrics as well. Could you quantify how walkaways looked in the third quarter versus the prior year just to give us a sense versus what you had told us in the second quarter? And how are those trending or maybe some color as – Denny you talked about some improvement in recent weeks. Any color on that quarter to-date or last part of September as well on the walkaways specifically?

Yeah. So in absolute terms Brian, you would always expect the walkaways to be lower in the third quarter anyway. So we talked you may recall in the second quarter of – a year ago was roughly 2.5% or slightly above 2.5%. And in the current year it was 5%. With lower volumes in the third quarter, you don't see the same kind of walkaways or wait times, but in the quarter as we moved on through the quarter, we're down about 2% in walkaways year-over-year from where we were last year. And we're hoping that bodes well because that's early in the process of us working with our operators to focus on that. And obviously, it's a big goal to take what will be a higher walkaway number just in absolute terms in the fourth quarter because the volumes are higher and have some year-over-year reductions that would even be larger than that.

We got – the team is very much focused on capturing that peak hour potential and that requires that we turn those tables and see it appropriately and I think the teams are in a far better position to do that than we were coming into this quarter. Brian M. Vaccaro - Raymond James & Associates, Inc.: Okay. That's helpful. And then I guess circling back on the consumer research project, Denny, that you mentioned you completed there in the quarter.

Yeah. Brian M. Vaccaro - Raymond James & Associates, Inc.: Obviously staying away from competitively sensitive info, but curious what some of the primary learnings were from that research?

I'm really not prepared to talk about that yet Brian. We're still absorbing a lot of it, trying to make decisions about it and I don't want to get out ahead of my skis on that, but I will tell you that it yielded a lot of good insight around various segments and opportunities that we have. So we'll look forward to sharing more on that as we get to the Q4 call. Brian M. Vaccaro - Raymond James & Associates, Inc.: Okay. Fair enough. And then just last one. I think there's been some discussion around some new productivity initiatives, maybe some server handhelds and some other potential initiatives. Can you just provide an update on where you are in timeline et cetera and anything incremental you can share on the productivity front?

It's still a little early for that, Brian but we do expect that to be a front half 2019 initiative to put some technology in our servers' hands that while yes, it could provide some productivity benefit. We are even more excited about the upside opportunity to speed of service, and attentiveness of service that that type of technology could provide for our guests. Brian M. Vaccaro - Raymond James & Associates, Inc.: All right. Thank you.

Will Slabaugh with Stephens, Inc. has our next question.

Hey, Will.

Yeah. Thanks, guys. I have to ask about the decision to push some of the marketing into the fourth quarter. And I guess more specifically what were you seeing midway through the quarter that led you to think that, that was the best course of action and then what should we expect in the fourth quarter in terms of percentage increase in marketing spend if you want to get that specific or maybe what the impact may be in your mind?

I don't want to get that specific about Q4 by any means, but you know we will have more weight year-over-year and again we'll share that as we get there. I think what we were seeing was we were seeing these issues surrounding walkways and ticket times and driving the traffic into an environment that wasn't ready to capture it. So it just didn't make sense for us to continue to push on that lever, and not be able to meet, greet and seat those guests and serve them in a way that was positive. So it really gave us a chance again in a relatively low volume quarter to take a break and focus our teams, and then take some of those dollars which are precious to us because we don't have a whole lot of them and devote them to the initiatives in Q4.

Got it. And a quick follow-up if I could on the Tavern platform. Can you talk about what the mix was in the quarter? And then you mentioned taking a couple of items up, I think three, up a dollar to the $7.99 price point. Did you see any push back from that and just in general the kind of customer response to the Tavern platform throughout the quarter would be helpful? Thank you.

So the change we made was at the beginning of Q4. So I'm not prepared yet to talk about what the impact is in quarter. I can tell you in Q3, we started out in period eight with about a 17.2% mix. And then by the end we're down to 16.4%. Again we came off that media, which had the 5 for $6.99 offer. So less people coming in for that also meant there was less mix associated with it. So we wanted to learn from that and continue to manage that mix appropriately.

Thank you.

Thank you.

Thanks, Will.

We have a follow-up question from Gregory Francfort with Bank of America.

Hey, guys. I just had two quick housekeeping questions. Just in terms of the office reset that you conducted, can you tell me what the annual G&A savings were from that in total?

Sorry, Greg, Could you repeat that? I couldn't hear it.

Annual G&A savings.

The annual G&A savings from the office reset?

Yeah. We were targeting in the neighborhood of $8 million to $10 million roughly, is what we were intending to save based off a, what at that time, was assuming a target bonus payout versus a target bonus payout the year before. So roughly $8 million to $10 million of savings. So we've experienced some of those savings and we've also given the performance, lowered our incentive comp expectations as well for the balance of the year. So yeah, $8 million to $10 million roughly.

And just one last one is, is $50 million – if you're going to end the year at kind of $50 million to $60 million of CapEx but clearly you're not going to have any or likely not going to have stores opening going forward. What should we sort of think about is the right run rate number for the business? I think you've said $50 million in the past but you've obviously been coming in a little bit better. So I'm wondering if that's still the right number or if you think you could be better than that on kind of an ongoing run rate maintenance basis?

Yeah. I think a real opportunity for us Greg and we leaned a lot into it this year with a lot of, what I'd call maybe foundational work that we've done on the technology side in our restaurants, new point of sale hardware, new food cost waste management system, new point of sale system, back office, server capacity expansion as well as the technology that we're talking about putting in our servers' hands. We really feel like there's an opportunity for us to invest on the technology side. A lot of that will be a lot more guest facing now that we've done that foundational work that we've done in 2018. I would expect in 2019 we'll have a significant focus on technology that the guests will be able to see. And so while that certainly won't come close to what we've spent on new unit growth. I do think it likely keeps the CapEx in that $50 million range.

Understood. Thank you.

Yep.

Oh, we're going to take Brian?

Right. Brian Vaccaro with Raymond James has a follow up question. Brian M. Vaccaro - Raymond James & Associates, Inc.: Yeah. Just one quick one, if I could. On the refranchising front, I know there's a lot of factors that go into how you think about the optimal company versus franchise mix. But Guy could you just maybe provide an update given the current situation versus when you initially launched the refranchising initiative? Just where you're thinking about it from a strategic long-term perspective? And also any other color you can provide on what's transpired on the refranchising front in terms of demand in those stores et cetera over the last few quarters, that would be great? Thank you.

Okay. So there's a lot of initial work anytime you ramp-up your refranchising activity and so we talked about that in the middle of last year, did a lot of that work over the next call it three months to six months to put the pieces in place and then began to much more actively market the territory. Initially, we had a few people kind of kicking the tires thinking maybe that things were available for a song, and I think they quickly realized that that wasn't the case, that we didn't have to franchise but it was a choice of ours both in terms of what sort of deal we would expect and what kind of partner that we wanted more importantly.

Yeah. That was critical (00:38:33).

And so as a result our more recent discussions have come with a lot more of those higher quality type partners that we think create some possibilities for us moving forward. So I feel like we're right in the throes of the types of partners that we would like to have discussions with and we're hopeful will reside in some benefit but nothing that we can announce today. In terms of going forward, it's always an option for us to do more of that as we read where we think the business is going in the future and weigh the risk of executing on what we'll need to do versus perhaps looking at franchising then we can make that call as we go along, but right now we're focused on 100 locations that we talked about. Brian M. Vaccaro - Raymond James & Associates, Inc.: That's helpful. Thank you.

Thank you, Brian.

Jon Tower with Wells Fargo has our next question.

Hi. Thanks.

Jon.

How are you doing? Thanks for...

Good.

... taking the question. I was just curious on the Tavern Double changes. It appears that you are pulling back on some of the relative discounting while many of your peers are actually ramping that up, particularly in the third quarter and it seems even more so into the fourth quarter. So can you walk us through the decision to do that and why? And especially given the risk of it potentially accelerating the traffic losses going forward, how you're thinking about traffic versus in-store profits?

Yeah. I think number one; Tavern Double is always viewed as an everyday value. So we manage that range of pricing very closely, so the guests can count on us, right? They know that they can always come in, find that $6.99 starting price point and then a very reasonable as we said relative price point anywhere from $6.99 to $7.99 to $8.99. With regards to how we view discounting, we still try to focus primarily on our Red Robin Royalty members who were the ones who give us the greatest share of their purchases and look to surprise and delight and reward them more so than others. You know we'll use the occasional direct marketing technique or other things to drive some traffic in beyond the their frequency we associate with our Red Robin Royalty program. So it is a fine art and a fine balance, but I would just say that we're really looking to make sure that we're getting that balance of traffic driving without too much trade down. And we saw a two too great a trade down the last time with regards to actually having incented our guests many of them to move on down from gourmet burgers to the Tavern platform, some of whom were already in the restaurant as opposed to driving purely traffic. So we're always looking for that balance and where we best reward our guests with discounts, but everyday value is where we believe we'll win long-term in this business. The guest wants to know they can count on you, not just a temporary discount this week.

Thanks. And then just quickly to follow up on the Red Robin Royalty members. Where do you guys sit on that today in terms of numbers?

Where are we guys? We're at 8.5 million total registrants and we look to always continue to build that, focus on it. Good time going into fourth quarter for our team members to be signing those new guests up.

Thank you.

Thank you.

Thank you, Jon.

All right.

That will conclude today's question-and-answer session. I will now turn the conference over to Denny Post for any additional closing remarks.

Thanks, James. I stepped on you a little there. I apologize. All right. We'll let everyone get back to watching the midterm election results and we're going to get back to running our business. Enjoy the remaining weeks of 2018 and the holiday season everyone. We look forward to sharing our full year results with you and our progress in February. Talk then.

That will conclude today's conference call. Thank you for your participation. You may now disconnect.