Good day, everyone, and welcome to the Chuy's Holdings Q2 2023 earnings conference call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode. 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 Howie, Vice President and Chief Financial Officer of Chuy's Holdings, Inc. At this time, I'll turn the call over to Mr. Howie. Please go ahead, sir. Thank you, operator. Good afternoon. By now, everyone should have access to our Q2 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. Looking ahead, we plan to release our Q3 2023 earnings on Thursday, November second, after the market closed. 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, everybody, and thank you for joining us on our call today. Our results marked another strong quarterly performance, with Q2 revenue growth of over 7%, including a 3.2% improvement in comparable restaurant sales. During the quarter, we saw solid comparable sales growth across all periods. Moreover, our strong top-line momentum has continued, and we are pleased with the results we've seen thus far into the Q3. In terms of profitability, we grew restaurant-level operating margin dollars by over 21% and generated an industry-leading restaurant-level margin as of a percent of revenue of 21.6%, which represents a 250 basis point improvement over last year. We are proud of what our team was able to accomplish during the quarter and believe that these results are a testament to the continued progress we are making on the various initiatives we've put in place to drive sustainable top-line growth and profitability. Moving on to our growth drivers. We continue to focus on menu innovations through our Chuy's Knockouts, our CKO platform. In April, we introduced our guests to several exciting menu items, including the Tex-Mex Burrito Bowl, Grilled Grouper Tacos, and Creamy Green Chile Chicken Enchiladas. The CKO perform continues to resonate with our guests, as our April CKO drove incremental traffic and mix at a higher% of the sales than our previous CKOs. To build upon this excitement, in late July, we launched our most recent CKO with Hatch Green Chile Burger, Steak Burrito Bowl, and Chicken Tinga Enchiladas. Early feedback from our guests thus far has been very encouraging. Our off-premise channel also performed very well during the quarter, mixing at approximately 28% of total sales as compared to 27% a year ago. The delivery channel helped drive our off-premise, off-premise growth with over a 30% increase in volume, mixing now at approximately 10.6% of our Q2 sales, an increase of approximately 210 basis points versus last year. In addition, we saw a significant improvement in our catering channel as we continue to build out our catering markets, representing 3.5% of our Q2 sales, an increase of approximately 80 basis points versus last year. Over time, we continue to believe our off-premise business will represent at least the mid-20s of our sales, with catering contributing approximately 4%-6% of the total sales. In terms of our marketing initiatives, our optimized digital media strategy effectively communicates our defining differences from our incredible value for our made from scratch food and drink to our exciting CKO offerings and overall differentiated experience at every Chuy's restaurant. This includes the use of TikTok, organic influencer programs on Instagram and Facebook, YouTube video advertising, and a promotional advertising partnership with DoorDash. Lastly, let me provide some update on our development plan. During the Q2, we successfully opened 1 new restaurant in Oklahoma City, Oklahoma. Subsequent to the end of the Q2, we opened 1 additional restaurant in Harker Heights, Texas. We're pleased to report that all of our recent openings have performed to our expectation. Additionally, in the Q2, we closed one restaurant in the state of Illinois. This was a unique opportunity to exit the lease of a satellite location at no cost to the company, and we do not currently expect any additional strategic closures. As we look ahead, we remain excited about our organic growth opportunities. For 2023, due to the continued permitting and inspection delays that are outside of our control, we are now expected to open five new restaurants, three of which have already opened, and the remaining units scheduled for the Q4. Unit growth remains a core piece of our long-term growth model, with our strategic focus on markets where our concept is proven with high AUVs and brand awareness. We continue to believe we can achieve 10% unit growth over time, and the growth we expect to achieve in 2023 and 2024 will be important steps to get there. With that, I'll now turn the call over to our CFO, Jon Howie, to discuss our Q1 results in greater detail. Thanks, Steve. Revenues for the Q2 increased 7.3% to $119 million, compared to $110.9 million in the same quarter last year. The increase was primarily related to improvement in our comparable restaurant sales, as well as an additional 53 operating weeks from new restaurants opened subsequent to the Q2 of 2022. In total, we had approximately 1,289 operating weeks during the Q2 of 2023, and off-prem sales were approximately 28% of total revenue, as compared to 27% a year ago. Comparable restaurant sales in the Q2 increased 3.2% versus last year, primarily driven by a 5.8% increase in average check, partially offset by a 2.6% decrease in average weekly customers. Effective pricing during the quarter was just shy of 7%. We expect to carry approximately 3.25%-3.5% pricing the remainder of the year. Turning to expense, cost of sales as a percentage of revenue decreased 310 basis points to 24.7%, driven by leverage on menu price increases, as well as overall commodity deflation of approximately 4% during the quarter. Based on the current market conditions, we continue to expect flat commodity inflation for the fiscal year, with deflation of low single digits for the Q3. Labor cost, as a percentage of revenue, increased approximately 40 basis points to 29.5%, primarily due to hourly labor inflation of approximately 5% at our 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 Q2 of 2022. We continue to expect hourly labor rate inflation of mid single digits for the fiscal year and Q3, in addition to a continuation of year-over-year staffing level increases. Operating costs as a percentage of revenue increased 10 basis points to 15.9%, driven by higher delivery service charges from increase in delivery sales and an increase in repairs and maintenance costs, partially offset by lower utilities and higher sales leverage on insurance costs as compared to last year. General administrative expenses increased to $7.7 million in the Q2 from $6.5 million in the same period last year, driven mainly by higher performance-based bonuses. As a percentage of revenue, G&A increased to 6.5% from 5.9% during the same period last year. In summary, net income for the Q2 of 2023 increased $2.8 million, or 36.4% to $10.7 million, or $0.59 per diluted share, compared to $7.9 million or $0.41 per diluted share in the same period last year. During the Q2 of 2023, we incurred $0.5 million or $0.02 per diluted share in impairment, closed restaurant, and other costs, compared to $0.7 million or $0.03 per diluted share in the same period last year. The decrease was primarily related to a reduction in rent paid on previously closed restaurants. Taking that into account, adjusted net income for the Q2 of 2023 increased $2.7 million, or 31.6% to $11.1 million, or $0.61 per diluted share, compared to $8.4 million, or $0.44 per diluted share in the same period last year. Moving to our liquidity and balance sheet as of the quarter, end of the quarter, we had $82.6 million in cash and cash equivalents, no debt outstanding, $35 million available under our revolving credit facility. We also purchased 83,521 shares of our common stock during the quarter, for a total of $3 million. As of June 25, 2023, we had $47 million remaining under our $50 million repurchase program, which will expire on December 31, 2024. With that, let me provide an update on our outlook. For 2023, we are now expecting an adjusted EPS of $1.80-$1.85, which includes an estimated $0.08-$0.10 per share, positive impact due to the Q4 of 2023, containing 14 weeks versus 13 weeks in fiscal 2022. This is based in part on the following annual assumptions: G&A expense of $30 million-$31 million, 5 new restaurants, net capital expenditures of approximately $30 million-$35 million, restaurant pre-opening expenses of approximately $2.5 million-$2.7 million, effective annual tax rate of approximately 13%-14%, and annual weighted diluted shares outstanding of 18.1 million-18.2 million shares. With that, I'll turn the call back over to Steve. Thanks, Jon. Our passion has always been to provide our guests with the unique Chuy's experience through our high quality, made from scratch food and drinks offered at an incredible value. We believe this is clearly reflected by our performance year to date. Through our continued focus on four wall, four wall operational excellence, thoughtful capital allocation, and exciting pipeline of unit growth, we are well positioned to capitalize on our positive momentum and the vast opportunity ahead of us. Most importantly, I'd like to thank each and every Chuy's team member for their hard work and dedication to earning the dollar every single day. With that, we're happy to answer any questions. Operator, please open the line for questions. Thank you. Ladies and gentlemen, at this time, we'll conduct our question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A 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 comes from Joshua Long with Stephens. Please state your question. Great. Thank you for taking my question. When we think about just the underlying environment and the strong results you reported, Steve, I think you mentioned that, there was, you know, solid comps through the quarter. I'm curious if you could talk about that, what you're seeing from the consumer, and then maybe just any other reads you have in terms of how they're using your concept. It feels like, you know, perhaps the mix piece and, you know, the traffic piece is consistent, if you kind of look at the underlying piece, but would be, you know, curious what your perspective is, given, kind of the update in the current environment. You know, it's been pretty consistent over the last year, year and a half. We haven't seen a whole bunch of pullback in any one area. Maybe slightly in bar mix, and a few months back, probably slightly in apps, but since we added on our, our bowls, you've seen that rebound a little bit. We haven't really seen any main issue as far or real differences of our track it over the last year. Got it. That's helpful. When we think about some of the strength you called out on the CKO platform, can you talk about how that's progressing versus your expectations? It seems like that maybe in April or in the 2Q period, that brought in some incremental guests. Just curious if you attribute that to awareness, culinary innovation, maybe all of the above, but anything that you could share there in terms of just. Yeah. Yeah, all of the above. Yeah. Thanks for answering the question. Yeah, it's a little bit all of the above. You know, we, we've realized probably 1, 1.5% of traffic, I'd say, by the CKOs. You know, obviously, we just finished our third... Well, we have just finished our third, entering our fourth one, ever for us. You know, it's really got a level of excitement, starting with our people first, and then obviously, on all our digital marketing, and so far that we're doing, is really getting people excited about trying some new stuff that's out there. Like we mentioned before, we usually run 3 items that will run for a total of, of 4 weeks in our stores, so, 4-6 weeks. We're pretty excited about those. You know, coming up in the Q4, you'll see a little bit of a change in some of the CKOs, where we're gonna do a barbell approach to one item that will start in Q4. That's coming up. Yeah, it's built a nice excitement, and really, it's nice to have some new things to talk about on a quarterly basis. Appreciate it. One last one, then I'll hop in the queue. When we think about just the overall development environment, we've heard a lot from your peers in terms of just permitting being the primary point of friction. It seems like you might be seeing something similar to that, but just curious how you're thinking about development overall, human capital investments to support that, and then specific to the two units that sound like they might have slipped, as part of your updated unit development guidance. Do you think about those slipping into next year and being additive, or does that just kind of push the entire pipeline out? I'll go with the end first. It's definitely going to just push the whole pipeline out a little bit. That's how that's going to work. You know, all, you know, with the construction, not only the permits and, and, and getting some, you know, people coming out and, and walking the units, it's, it's still the construction cost is still quite a bit higher than it, it has been. You know, we've seen that kinda flatten out, but it definitely hasn't come back down yet. We're, we're kind of also looking at that as we move forward. You'll see us, you know, this year in that, that five range, you know, the five that we mentioned. Our, our long-term goal, goal, you know, right around probably in 2025, is to get back to that 10% growth rate. Got it. One more there. Do you think that you can accelerate that in 2024? Kind of as a, you know, a step function, if you're going to do 5 this year, is that the right number in absolute terms, or can you step that up despite some of the headwinds that we're seeing out there? I, I'd say, you know, a couple more than, than, than five, you know, we'll be looking at probably for next year. Then, you know, by, by 2025, to get back to that 10% growth, as I mentioned a second ago. Great. Thank you. Thank you. Our next question comes from David Tarantino with Baird. Please state your question. Hi, good afternoon. First question's on the recent sales trends. I think, Steve, you mentioned that you were pleased with what you've seen so far in Q3. I was wondering if you could elaborate on what you're seeing, more specifically. I know you have less pricing, than you had in Q2, so any color would be helpful. Thank you. You're welcome. It's, it's, it's really trending fairly, similar to P6 in that 2, 2+ range, 2 to 3. Okay. That's the, the total comp? Yes, sir. The total comp. Okay. Yeah, as you mentioned, you know, we had about 3.5% pricing roll off. That's talking... you know, you're talking about a 1% negative traffic, possibly. Yeah. Got it. Okay. That's, that's good. That's helpful. You know, Jon, if I, if I look at your guidance and the performance you've had on restaurant margin, it, it looks like maybe this year is shaping up to be, at least at the high end, if not above the high end of that long-term target you shared previously. I was wondering if you could kind of frame up how you're, you're thinking about the margin structure longer term, and is it possible to think about 20% plus type restaurant margins, you know, as you, as you look at the business? Well, I mean, it's all, it's all related to kind of the volumes and how those shake out. What we're seeing for the rest of the year, you know, we're looking in the Q3 with those prices coming off. We're not gonna have the sales leverage that we've had in the first two quarters. You know, we're gonna see a little less margin here in the Q3. In the Q4, obviously, we have the extra week, but we're also rolling over the addition of our extra delivery partner in the Q4. That's gonna flatten that out a little bit as well. I think that will temper the margins a little bit than what we're seeing right now. long term, I mean, we're still looking at that, you know, 300-350 basis points above, so in that 19%-20% range. Got it. Thank you very much. Mm-hmm. Thanks, David. Our next question comes from Brian Mullan with Piper Sandler. Please state your question. Hi, good afternoon, guys. This is actually Ashley, on for Brian. My question is about your recent catering business and how that is coming along versus, you know, your own internal expectations of that, and what kind of impact has it had to your off-premise business? Thanks. Yeah, we're, we're excited. Obviously, you know, we're in, 16 state-- well, how many? 16, markets- 17 markets. 17 markets currently on the catering, and we're excited. I think I mentioned in my prepared statement, about 80 basis points higher than the year. So we're very, very excited about that. We'll continue to add certain trucks and refill, and re-fill some of our markets as we continue forward. We believe long term, we believe that catering number can be in that 4%-6% range, you know, over the next few years. That's great. Thank you for the color. I'll pass it back. Thank you. Your next question comes from Brian Vaccaro with Raymond James. Please state your question. Hey, thanks. Good evening. I just wanted to circle back on commodities. Jon, could you provide some more color on the items you're seeing favorability on driving that, that recent deflation? Also, remind us where you are on your beef contracts, specifically. Sure. I'll just start with the beef. Beef, we're contracted through the rest of the year, just a little spillover in the next year, but not much. It's really just basically through the rest of the year, and those are at prices, a little less than last year. That's some of that deflation. We're also seeing significant deflation, obviously, in chicken, as I think most people are, coming off of the all-time highs from last year. Seeing deflation in, in dairy as well, and then some of our produce. We expect kind of the produce, that always kind of jumps up here in the kind of the third and Q4. We're also seeing inflation in some of our grains and oils, and things in our grocery basket. Those are really the big items. Okay, great. Thank you for that. On labor, you talked about increasing staffing levels, which I think makes a lot of sense as dining continues to recover. Could you provide any perspective just on how much average hours were up or some other way that you might be able to quantify that? Maybe more broadly, just speak to, you know, what you're seeing in terms of turnover, and are you seeing any tangible benefits of, you know, more tenured teams driving better ops, increasing guest satisfaction, et cetera? Can you just speak to that dynamic a little bit? Well, I, I'll speak to turnover. Turnover, you know, from an hourly standpoint, we're still a little over 100%. From a management standpoint, a little over 26%-27%. As far as the hourly, I don't have that figure for you as far as the increase over last year. What we have been doing is, is replacing a lot of our overtime hours with, with, kind of full-time positions now, which obviously, when you're replacing with fresh people, that's gonna help the guest experience as well, so you don't have as much overtime. That's also, you know, helping out. We're continuing to get, you know, fully staffed on, on each, each and every shift, and that helps the customer experience. All right. That's great. Then just lastly, on the development front, obviously, build-out costs have been pressured in recent years. Are you seeing any green shoots of relief on that front, on the horizon? Maybe you could just level set us, just in terms of your unit economics that you're underwriting as you think about the pipeline X 12-24 months. Well, we, we continue to, to underwrite. You know, we're looking at the cost in a new unit in that $2.9 million-$3.3 million, is kind of the, the cost of it, all in, net of, of, landlord, dollars. But as far as, as what we're seeing from a, construction cost standpoint, we're seeing costs starting to flatten out, but not yet come down. You know, I think I've heard somebody else saying: We don't want to get these developers used to these prices. And so- Mm ... you know, hopefully, we're, we're trying to, to get as, as competitive as we can in some of these pricings, so we can bring those costs down, but right now we're not seeing it. All right, great. I'll pass it along. Thank you. Thank you. Your next question comes from Todd Brooks with Benchmark Company. Please state your question. Hey, good evening, everyone. quick question, and not much left to ask, but you talked about, Steve, you referred to kind of the June, July trends, and I think they were, Jon, you might have sized them in the 2-3 range, which with the pricing roll-offs, very impressive for the July result. I'm just wondering, with your geographic footprint, this crushing heat, have you been able to use the patios to the full extent that you normally would seasonally in the summertime? And do you have a sense of maybe, is there actually a stronger underlying demand that just the, this brutal heat is keeping from, being able to use the restaurant? Thanks. Yeah, it's been, it's been wild, but it, it, really, exactly. I think if you remember a year ago at this time, we talked about the, the, you know, the 60 something days of over 100, and we're just in it again. It's very similar to a year ago. Yeah, it definitely affects the, you know, in Texas, obviously, and, and elsewhere, definitely some of the patio sales. No one's sitting out in the patio, at, at 100 degrees, so that's definitely an effect. Like I said, it's very similar to a year ago at this particular time. That's the true. Thanks, Steve. You got it, buddy. Our next question comes from Nick Setyan with Wedbush Securities. Please state your question. Thank you. In terms of the commodity inflation, I, you know, appreciate the Q2, you know, disclosure around down 4%. I'm sorry if I missed this, but what's Q3, the Q3 expectation and the Q4 expectation? Or maybe a better way to ask it is, you know, sequentially versus Q2, are we, are we kind of flattish in terms of where the food basket is, or are we continuing to see it go down? I think it's flattening out. I mean, if you're looking, like over last year, we're looking, I think we said low single-digit deflation for the Q3. We'd look something similar to that, to flat deflation in the back half, in the Q4, which gets us to basically flattish for the year, is kind of how we're looking at it right now. Just given the math on the lower pricing and that, the inflation is sort of a mid-25% COGS, the right way to think about Q3, because it just seems like it'll be a big jump from Q2? Yes, that's kind of, that's kind of what we're looking at. Okay. Okay. In terms of just, you know, Q3, Q4, unit level margins, you know, historically, Q4 is a little bit lower, but we have the extra week. I mean, do they end up being a little bit closer to each other? You know, both of them may be in the sort of high 17% range? Come back again on the unit level margins. Is that what you're saying for the Q4? Q4 tends to be lower than, than Q3, you know, historically. Right. Given that the extra week, does that kind of help it come up closer to Q3 this year? Yes, it actually increase it a little bit over Q3. Q4. Okay, got it. Okay. Thank you very much. Mm-hmm. Thanks, Nick. Our next question comes from Andy Barish with Jefferies. Please state your question. Hey, good evening, guys. Wonder if you can give us an update on sort of dining room traffic versus pre-COVID. I know there's been some big changes in seating and hours, but just trying to level set on that. Do you see that as an opportunity, just given some of the, you know, the shifting consumer behavior out there? Again, with, with our addition of our other delivery service, and that increasing from a% of sales, our dine-in sales are still right from a traffic standpoint, still at about 75%-80% of what they were prior to the pandemic. We've been pretty consistent with that. As you know, we still have taken some of those seats out, and we haven't put those back in, just from a productivity standpoint. Also the hours, we haven't brought those hours back either. Those, you know, we've deemed that those haven't been very profitable hours as well. Yeah, we're still at that 75%-80% in traffic from a dine-in perspective, but our off-premise has grown a little bit. Okay. Then, on the marketing side, I know you're up, back up to about, you know, 1.5% or so of sales. Is, is there any, any new, you know, channels or waiting, kind of, that you're looking at for, you know, for that, that media spend? Yeah. Well, right now, we're, we're pretty happy with that%. As things change, we're obviously looking at everything. We're doing a little bit, you know, I mentioned a few during the-- my prepared statement, but a couple other things that are fairly new is programmatic TV, and we're doing a lot of stuff with, you know, Yelp and so on, on top of that. We're always looking at things and redistributing, but we're pretty pleased with all the, the, the, the mediums that we're using. Okay. a few years back, I mean, again, pre-pandemic, you guys were doing outdoor, which seemed to have some effectiveness in highlighting kind of the core... The core values, anything, you know, along those lines in certain markets or, you know, just keeping it balanced? Yeah, no, but that, we consider that. I, I have that in that local store marketing fund that we do, and, and that's part of the 1.5, 1.45, and those are continuing. We do, do have quite a bit of outdoor and a lot of local store initiatives that we always will do from a, a, a local store profile. Appreciate it, guys. Stay cool. Thank you. Thank you, Andy. Thanks. Thank you. A reminder to ask a question, press star one. Our next question comes from Chris O'Cull with Stifel. Please state your question. Thanks. Good afternoon, guys. Hi, Chris. My question relates to development. you know, just given the company's strong performance and sizable cash position, why not try to accelerate unit growth in 2024 beyond just a handful of locations? Well, I mean, we're gonna grow as, as, as fast as, you know, deemed reasonable, given the. Environment environment. I mean, right now, it's, it's not a matter of finding sites, it's a matter of getting those sites open with the permitting and things like that. You know, if we can right now, we're saying that, we'd also like some of the costs to come down a little bit. That's kind of where we're looking right now until we see kind of the construction and, and the permitting and some of that stuff to turn around a little bit. Yeah, need some relief in those areas. I, I know you guys have struggled with, with openings in certain markets like Chicago and Denver. I'm just wondering how those experiences are shaping y'all's development plans over the next couple of years. Well, I think that's, you know, why we're looking at kind of the 5-7 and focusing on those states, Chris, because as we focus on those states, I think we're getting better brand recognition, in some of the other states that we'll enter after the 3-5 years. Those, those states we're currently focusing in on have high AUVs, great brand recognition, and quite honestly, they're, they're very favorable from a business standpoint, from a margin standpoint. Those are the, the states we're focusing in on in the next 3-5 years. Is the strategy to be more, follow more of a contiguous market, you know, going from, you know, markets in close proximity because you just need that brand awareness as you go into newer markets? I think so. I think, you know, if you go back to... I hate to bring up 2013, but we kind of jumped into a lot of new markets. We'll take that, more slowly, I guess, when we start branching into new markets, and not all at once in 1 year. We'll continue to open in these, you know, states that we have high brand recognition and contiguously, next, next to that state, opening, some new, new markets. Yeah. That, and that's over the next fit. The states that we're talking about was our growth over the next 5, 5 years and getting a little bit beyond. Plenty of room. Okay. I apologize if I missed it, but, Jon, did you comment on just the cash position of the company and what you guys are maybe considering for deploying that cash or returning it to shareholders maybe more aggressively? Yeah, I mean, we continue to want to be somewhat opportunistic in buying back the stock, but we did buy back $3 million this quarter. We still have about $82 million-$83 million on the balance sheet. You know, and then continue, obviously, opening stores. We'd like to get a little more aggressive in buying that stock back. Again, we want to be somewhat opportunistic in that as well. Okay. Thanks, guys. Mm-hmm. Thanks, Chris. Thank you. There are no further questions at this time. I'll now hand the floor over to 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. Thank you. This concludes today's conference. All parties may disconnect. Have a great evening.