Good day, everyone. Welcome to the Chuy's Holdings First Quarter 2023 earnings conference call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the lines will be open for your questions following the prepared remarks. On today's call, we have Steve Hislop, President and Chief Executive Officer, and Jon Howey, Vice President and Chief Financial Officer of Chuy's Holdings, Inc.. At this time, I'll turn the call over to Mr. Howey. Please go ahead, sir. Thank you, Operator, and good afternoon. By now, everyone should have access to our first quarter 2023 earnings release. If not, it can be found on our website at chuys.com in the Investors section. Before we begin our formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements. These forward-looking statements are not a guarantee of future performance, and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. With that out of the way, I'd like to turn the call over to Chuy's President and CEO, Steve Hislop. Thank you, Jon. Good afternoon, everyone, and thank you for joining us on our first quarter earnings call today. We're proud of our results for the quarter with top-line momentum from the fourth quarter continuing into the new year, resulting in comparable restaurant sales growth of 8%. In addition, we achieved store-level operating margins of 19.7%, up 70 basis points year-over-year, which continues to be among the best in casual dining industry. Combined with the extensive unit growth opportunity ahead of us, we have never been more excited about what lies ahead for Chuy's. During the first quarter, we saw positive comparable sales growth across all periods, with January and February benefiting from the Omicron variant and favorable weather comparisons. Importantly, our positive momentum has continued into April. Ultimately, we believe our fresh made from scratch food and drink at an incredible value continue to resonate with our guests across the income spectrum and are the driving force behind our growth. Turning to our growth drivers, we'll start with menu innovation. January saw the return of our fan favorite Veggie Enchiladas, as well as the introduction of our new Wild Burrito and Hatch Beef Tacos through our Chuy's Knockout platform. We continue to be excited about our CKOs as that platform drove incremental traffic and mixed at approximately 2.5% of all entrees sold during the six-week period, which is in line with our first iteration in October. In our third iteration, late April saw the Tex-Mex Burrito Bowl, Grilled Grouper Tacos, and Creamy Green Chile Chicken Enchiladas added to the Chuy's menu for a limited time. While we are only two weeks into the current CKO period, we remain encouraged by the results we've seen thus far. Our momentum also continued with the growth of our off-premise channel, which represents 27% of total sales this quarter. While our off-premise mix is down modestly compared to last year, we are thrilled to see the off-premise dollars are up year-over-year with the reduced off-premise mix driven by continued improvement in our dine-in sales. Long-term, we believe the off-premise will represent mid 20% of our sales, with catering contributing approximately 4%-6%. Finally, in terms of our marketing initiatives, we continue to put heavy emphasis on digital media, including the use of TikTok, organic influencer programs on Instagram, YouTube video advertising, and a promotional advertising partnership with DoorDash. These initiatives have allowed us to effectively communicate our defining differences from our incredible value from made-from-scratch food and drink to our newly introduced CKO offerings and the unique overall experience at every Chuy's restaurant. Moving to profitability. Our ongoing focus on operational efficiencies and cost management resulted in a strong 19.7 restaurant-level operating margin, representing a 70 basis point improvement year-over-year. We believe these results showcase the strength of Chuy's brand and our ability to generate restaurant-level margin that is among the best in the industry. As a reminder, at the end of January, we took approximately 3.5% pricing. We believe this is the appropriate level to balance our strong value proposition to our consumers with solidifying our margin profile as demonstrated by the results we were able to achieve this quarter. Lastly, before I turn the call to Jon, let me update you on development plan. During the first quarter, we successfully opened one new restaurant in Fayetteville, Arkansas, bringing our total to 99 restaurants. Looking ahead, we remain excited about the organic growth opportunities ahead for the brand through accelerated unit expansion. For 2023, we continue to anticipate opening six to seven new restaurants focusing on markets where our concept is proven with high AUVs and brand awareness. With that, I'll now turn the call over to our CFO, Jon Howey, to discuss our first quarter results in greater detail. Thanks, Steve. Revenues for the first quarter increased 12% to $112.5 million compared to $100.5 million in the same quarter last year. The increase was primarily related to improvement in our comparable restaurant sales as an additional 43 operating weeks from new restaurants opened subsequent to the first quarter of 2022. In total, we had approximately 1,278 operating weeks during the first quarter of 2023, and off-premise sales were approximately 27% of total revenue. Comparable restaurant sales in the first quarter increased 8% versus last year, primarily driven by a 6.2% increase in average weekly customers and a 1.8% increase in average check. Effective pricing during the quarter was just shy of 7%. Turning to expenses, cost of sales as a percentage of revenue decreased 60 basis points to 25.5%, driven by menu price increases taken subsequent to the first quarter of 2022, partially offset by approximately 5% commodity inflation. Based on the current market conditions, we are currently expecting flat to slightly positive commodity inflation for the fiscal year, with deflation of low single digits for the second quarter. Labor costs as a percentage of revenue increased approximately 60 basis points to 30.3%, primarily due to hourly labor inflation of approximately 7% at comparable restaurants, as well as incremental improvement in our hourly staffing levels as compared to last year. This was partially offset by menu price increases taken subsequent to the first quarter of 2022. We expect hourly rate inflation of mid-single digits for the fiscal year in the second quarter both, in addition to a continuation of year-over-year staffing level increases. Operating costs as a percentage of revenue decreased 10 basis points to 16.1%, driven by lower to-go supplies from lower off-premise mix during the quarter as we continue to see improved dine-in sales. Our occupancy cost as a percentage of revenue decreased 60 basis points to 7% as a result of sales leverage on fixed occupancy costs. Marketing expense as a percentage of revenue held steady at 1.4%. General and Administrative Expenses increased to $7.8 million in the first quarter from $6.7 million in the same period last year, driven mainly by higher performance-based bonuses. As a percentage of revenue, G&A increased to 6.9% from 6.6% during the same period last year. In summary, net income for the first quarter of 2023 was $8.2 million or $0.45 per diluted share, compared to $5.5 million or $0.29 per diluted share in the same period last year. During the first quarter of 2023, we incurred $0.4 million or $0.02 per diluted share in impairment closed restaurant and other costs compared to $1.3 million or $0.05 per diluted share in the same period last year. The decrease was primarily related to a reduction in the rent paid on previously closed restaurants. Taking that into account, adjusted net income for the first quarter of 2023 was $8.5 million or $0.47 per diluted share compared to $6.5 million or $0.34 per diluted share in the same period last year. Moving to our liquidity and balance sheet, as of the end of the quarter, we had $82.6 million in cash and cash equivalents, no debt outstanding and $35 million available under our revolving credit facility. Turning to our 2023 outlook, we are now expecting an adjusted EPS of $1.71-$1.76, which includes an estimated $0.08-$0.10 per share positive impact due to the fourth quarter of 2023, containing 14 weeks versus 13 weeks in fiscal 2022. This is based in part on the following annual assumptions. G&A expenses or expense of $29 million-$30 million, six to seven new restaurants, net capital expenditures of approximately $35 million-$39 million, restaurant pre-opening expenses of approximately $2.5 million-$3 million, effective annual tax rate of approximately 13%-14%, annual weighted diluted shares outstanding of $18.1 million-$18.2 million. With that, I'll turn the call back over to Steve. Thanks, Jon. We remain excited by the long-term opportunity ahead for Chuy's. We've maintained our top line momentum, driven further improvement in restaurant margins, and have an extensive pipeline of unit growth ahead. Together with our disciplined capital allocation, we believe we've put Chuy's on a path to maximize shareholder value in 2023 and beyond. With that, we're happy to answer any questions. Operator, please open the lines for questions. Thank you. Ladies and gentlemen, we will now be conducting our question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is coming from the line of Nick Setyan with Wedbush Securities. Please proceed with your question. Hey, congrats on another incredible quarter. That's become so routine now. Thanks, Nick. I appreciate it. I don't even know if a congratulations is in order. It's become so routine now. I guess, you know, April, you know, a lot of, you know, interest in the April, you know, trends just given the industry data. Would you be willing to comment on what you've seen so far in April? Sure. I mean, if you look at the progression, I think it's similar to what everybody else is seeing. We saw that come down a little bit in March and then continue to come down a little bit in April. We saw 3.3% in March and then about a 2% in April. Those trends have stayed somewhat consistent after that. Yeah, they've stabilized. Okay, about 2% or so, that's where we are right now. Around that. Yeah. I mean, that trending. Yep. Yep. Yeah, right in that. No lower than that. Got it. Okay. The mix, I mean, heading into the quarter, were you expecting the mix to be so negative and transactions to be so positive, or is that something that just kind of happened during the quarter? I mean, as you know, we're rolling over, Omicron, we're expecting positive traffic for sure going into the quarter. Absolutely. Rolling over that, especially in January and February and maybe a little bit of March, but mainly January and February. you know, after the Omicron, you know, we had some pent-up fever last year, why the third quarter and fourth quarter, third period and fourth period were pretty strong for us last year. The negative mix is just the shift into the dining room. Is that what it is? It's just guest traffic in the dining room. What do you mean? Sorry, the negative shift. What do you- We don't have a negative shift. The negative mix. On sales, you mean? Well, just within the comp, within same store sales growth. Are you okay? Are you talking the, like the...? I'm sorry, Nick. Are you talking the price? 'Cause we have prices- Yeah. Yeah, we have price of about 7%, the mix has decreased a little bit. Some of that is the attachment rate that we've seen on the bar and also the appetizers. Yeah, that was a little bit of a surprise. Mm-hmm. Okay. Then on the cost of sales, you know, 25.5%, you know, again, was that relative to your expectation? Was that, you know, well below, coming into the quarter? How should we think about that level going forward for the rest of the year? Well, actually, that came in a little lower than what we expected, and obviously a little higher margin because of that. What we're seeing, like I think I said, I think we were expecting commodity cost inflation to be in the mid-single digits, and now we're expecting that to be flat to slightly positive for the year. We are seeing low single digit deflation here in the second quarter. We see that kind of continuing for the second quarter at least until we roll over, you know, we roll over the pricing in the third and fourth quarter, that we probably, at this point, don't intend on making another price increase. As you know, we took a price increase in July of last year of about 3.5%. Got it. Okay. Thank you very much. Thanks, Nick. Thank you. Our next question is coming from the line of Alexander Slagle with Jefferies. Please proceed with your question. Hey, thanks. You know, I think on Nick's questions before, I think you may have flipped the check-in traffic a little in your prepared remarks. That may have been a little bit of the confusion. I just following up on the commodity deflation outlook, which is pretty surprising just how it's come down that much and thinking about the, you know, the first quarter earnings performance and, you know, a $0.10 beat or so and raising the outlook for the year, about the same, I'm just kind of wondering, you know, how that changed your thinking. I guess, not looking to take additional pricing, but also are there opportunities to reinvest some of that savings that you get on the cost of goods line elsewhere in the business, maybe labor hours or something to enhance the guest experience? We're always looking at balancing everything we do, and it's not so much on a statement on what our analysts are saying. Right now we're working and continue to work on all that, and we'll continue to increase our labor line over the last couple quarters, if you've noticed that, and we'll continue to look at a little bit of that as we move forward and invest in our people a little bit more. Thanks, Alex. You are right. I wanna make sure I correct that. We did have an increase in average weekly customers of 1.8% and an average increase in check of 6.2%. I apologize. Good catch by Alex. A question on the dine-in traffic versus kind of maybe where we are versus the base of 2019 or so, and kinda how that's looking and the opportunity to, you know, further fill the dining room and what the margin implications could be, you know, as you look ahead. Yeah. We're running traffic in kind of the mid to upper 70s right now of what we did in 2019. As you know, and we've been very open with that, we've reduced the number of tables in our restaurants by about 20%-25%. That's really running in line with kind of the reduction in tables and the reduction in staff related to those tables. We'll continue to build that. I think there's an opportunity there with table turns to build that. We're kind of running in line with what kind of our new base is that we've talked about in the last couple of years. The key of it, all that is maintaining that to-go number that we have, which we said, long term, we expect it to be in the mid-20s, and right now, last quarter was at 27. Pre-COVID, that was at, you know, in that 12%-14% range. Great. Just a follow-up on the Knockouts and the performance you've seen to date, kinda how your thinking has evolved, how well it's working, what's working best, and, you know, opportunities to drive frequency and check, just any thoughts how you're-? Yeah. You're looking at it. Yeah, we're excited. We're excited. We just started our third one. We started in the fourth quarter, and then we did it in the first, and we just actually started the second quarter one a couple weeks ago, and we're actually really pleased that it actually performed a little bit higher than the first two. We're pretty excited about them. You know, what we've learned on those is obviously more from an operational point of view of getting all our servers and everybody excited about them in the stores as far as selling them. That's really been good for us. As you see us and as we continue to move through, you will see a little bit of a barbell approach to these. That will probably start in the fourth quarter, you'll see one. It shouldn't change a whole bunch on your PPA mixer because you're talking one out of the three. That's what we're gonna see is that we have the ability to maybe have a little bit higher price on 1 of the CKO items as we move forward. That's great. Thank you. Congrats. Thank you. Thank you. Thank you. Our next question is coming from Todd Brooks with The Benchmark Company. Please proceed with your question. Hey, thanks. I'll add my congratulations. Just great results. Thank you. Thank you. Couple quick questions. One longer term. I think we're talking six to seven units this year. As we're looking at the current real estate environment and operational readiness, Steve, I know your goal is to get back to kind of 10% unit growth over time. Do you see that being achievable in 2024, or do we need things to change further either for the cost to construct or the ease of ability to construct before we can really unlock like a next step of growth up beyond this year? Yeah, I'd say yes on that. you know, we're gonna work real hard, looking at it though, but you know, right now we have not seen an easing up of the construction dollars, until I've seen it flatline, but it's still in that 25%-30% up on all construction. It's not any easier to get permits. It's not any easier on the supply chain. you know, I'd say we probably have added on our basic timeline another 60-75 days to get a construction job done for us, just because of the delays. I really wanna watch. I'd like to see the, the construction dollars come down a little bit. You know, our pipeline, we have the ability from an operating perspective to get all this as far as people-wise to make it happen. I just like to see some things settle out as we move forward. It's a tough environment for construction and getting anything done with some of these cities, whether it be permits or still supply chain. Great. Thanks, Jon. Thank you. Just trying to think on, G&A as we looked at the 6.9% in this quarter. Are there any year-over-year variances that we need to think about in the upcoming quarters, bonus spend versus maybe how bonus was accrued last year? Or is using kind of that 6.97% range the right number to use for the balance of the year? Actually you should probably use somewhere around between 6-6.5 for the rest of the year on average. Actually, I'm sorry. I've always got to add the stock comp back. Are you including that in there, right? I was, yes. Yeah. Yeah, that is pretty comparable. Right around that 6.9-7. Okay, great. One final one. Just I know that when you were talking about maintaining the mid 20% level for off-premise, the catering is a big part of it. How is that business accelerating now you've rolled out across all the markets, you're getting a little tenure on trying to build those relationships? Where do we stand in building that business, how did it mix out in this quarter? Thanks. We're sitting at like as you know we were at about 3.7% at the end of the year last year. How about just the quarter, Jon? For just the quarter. We're up about $1 million in sales this quarter over the same quarter last year. From a percentage standpoint, we're at about a 2.3% versus a 1.6% last year. Great, thanks. We do have the opportunity to add a couple more catering trucks as we continue this year. I'd say three to four more in existing markets and a couple of one-off markets. We will have some improvement in that. Like we said, that 4%-6% catering number is more a long term number, as we've mentioned, you know over the next three to four years. Okay, thanks, Steve. It's yeah. Yep. To mention, we said 3.7% the fourth quarter last year. That is our biggest catering quarter to put that in perspective. Thank you. Our next question is coming from the line of Andrew Wolf with C.L. King. Please proceed with your question. Thank you. Can you give us a sense of sort of the pricing cadence for the rest of the year? You know, as pricing rolls off, you know, this quarter was, you know, 7%, I guess you said, you know, when does it sort of... I think the last thing you took was January 3.5%. Yeah. you know, just how it sort of rolls off. Sure. At the end of June, 3.5% will roll off from the 7% we just mentioned. We don't anticipate taking any more price this year at all. For the year, you'll average probably in that 5.1% level, the second half of the year will be in that 3.5% level. Okay. Thank you. you know, just using the check amount for the first quarter, taking that out of the April, you know, comp. If traffic's down around 4% Is that coming more from, you know, delivery 'cause of the you know, the extra cost or is that kind of equally dispersed between the... In dining at the restaurant and the delivery? I'm trying to- Yeah, I don't understand. You're saying traffic being down four, you're assuming traffic's down 4%. Where is that coming from? I think it's pretty equally dispersed. I mean, as far as Yes. We're actually, from a transaction standpoint, up in delivery. Delivery now is for the quarter was about 10.7%, where it was about 9.4% last year at this time. Our delivery continues to increase. Yeah, it's even increased from the fourth quarter. Yeah. Okay. All right. Yeah, I was more asking about April, but maybe you don't have that data right in front of you. Because you know, what we're hearing is, you know, for value-conscious consumers, you know, paying the extra $5 or whatever it is per order. Yeah, we continue to see the same trends in delivery even in April. Yeah, it's moving. It's continuing to grow. Okay, great. Thank you. Lastly, could you tell us, any metrics you could share on new store productivity either? I don't know if it's too soon to give that kind of metric for Fayetteville because the way the store is open, but I think there are two other restaurants, you know, not in the comp base. We've been very pleased. Yeah. We're. They're definitely hitting the numbers, if not exceeding them. Yeah, we've been very pleased with those openings. Yeah. As you know, we've really focused our development in the five to seven states that we have great brand recognition, and great AUVs, and they're great states to operate in. They are hitting those targets. Yeah, On the sales side and on profitability side. Okay. Thank you. Also congratulations on the quarter. Thank you, Andrew. Thank you. Our next question is coming from Joshua Long with Stephens. Please proceed with your question. Hi, this is Daniel Breen on for Josh Long. Thank you for taking my questions. Earlier, you talked about reinstating digital advertising and leaning heavy into digital marketing. Are there any learnings you can share on that front so far as far as what you've seen from a customer acquisition and customer retention standpoint? Again, yes, it's been very consistent since we brought it back, basically in the middle of last year. It's been very, very well. Again, it's getting out our defining differences. How I view digital a lot is really just making sure that we have share a voice out there, which is the main thing to all the people that are out there. Where we've seen some customer acquisitions is more on our YouTubes, a little bit on the TikToks, and programmatic type videos. That's where we're seeing some movement. Again, we just... It's been real consistent over the last three quarters. Okay. Thank you. That's helpful. On that mid-20s off-premise mix, how much of that is coming from third-party delivery? Well, I mean, third party delivery is, say, 10.7% this quarter. I mean, you're, you know, currently you're looking over, you know, 30%-40%. Okay. Then on the unit development cadence, like how should we think about the timing of it for the rest of the year? What I'd do, I'd probably look at, probably one in the second quarter, and then the bulk of them will be coming in the end of the year, fourth quarter. Okay. Thank you. That's all I have. Congrats on the quarter. Thanks, Josh. Thank you. Our next question is coming from the line of Drew North with Baird. Please proceed with your question. Thanks for taking the question. I just was hoping you could unpack the Q2 restaurant-level margin a bit further. I think typically with seasonality, you see a step up in margin, and it's quite clear on the cost of sales line. Maybe, I guess I was wondering if you could elaborate on how you are thinking about the other lines within the restaurant-level margin, specifically as it relates to Q2 and setting some guardrails around the overall margin expectation there. Sure. I think if you look at Q2, you could probably apply the same margin expansion that you saw in Q1, right around there to maybe ± 20 basis points. You could see that come down a little bit from that range in Q3 as we lap over those price increases in the back half of the year. Remember in the fourth quarter, when you're looking at margin, it's gonna be a little more enhanced because we have that extra week in there that will enhance those margins in the fourth quarter. Okay, that's helpful. On commodities, I guess I was hoping you could just elaborate on the biggest drivers of the deflation you're seeing in Q2. I think it's maybe the first we've heard among the restaurant chains and just your overall lower inflation outlook. I guess, how much visibility is there to the commodities in the back half? What% are you fixed today, et c.? Yeah, we generally fix about 40% of our commodity basket. What we're seeing, from a deflationary standpoint is the biggest driver is chicken, which I'm sure you're hearing. I mean, last year we hit all-time highs in chicken. We are seeing a little decrease in cheese as well. We locked in our beef for the whole year at slightly better prices than last year. Those are your biggest drivers. Produce is a wild card out there. Right now, it's providing us a little deflation, we don't anticipate that for the whole year 'cause that kinda fluctuates up and down. Our biggest inflation drivers are groceries for the most part right now. Very helpful. Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question at this time, please press star one on your telephone keypad. One moment, please, while we pull for questions. Ladies and gentlemen, we have reached the end of our question and answer session. I would like to turn the floor back over to Mr. Steve Hislop for closing remarks. Thank you so much. Jon and I appreciate your continued interest in Chuy's and are available to answer any and all questions. Again, thank you and have a good evening. Ladies and gentlemen, this does conclude our teleconference. You may disconnect your lines at this time. We thank you for your participation.