Good afternoon, everyone. My name is Chris O'Cull. I'm the restaurant analyst with Stifel. I am happy to be joined here on stage with Chuy's management team. Just to my left, CFO Jon Howie and CEO Steve Hislop. Chuy's is a casual dining Tex-Mex restaurant chain. They operate 100 restaurants across 16 states. With that introduction, I'll welcome Steve and Jon, and I'll start off with a question here. Steve, I know the company hasn't reported the Q4, but the company had a strong first three quarters of 2023, with comp sales up more than 4%. Restaurant margin, I think, was at around 20%, and earnings per share growth was in the high 30% range. I'd like to start by just asking you to describe the company's priorities as we head into this year. Do it again. We're going to look into that. No, the key for us, we have to be turtles. I mean, that's the thing we talk about all day long is turtles. You gotta be in your Shell. You gotta be in your four walls. You gotta out-execute everybody. That is the number one thing. It's all pure execution, whether it be the service times or their ticket times, or the cleanliness of the building. Stay up on the staff levels, but you have to execute, and that's where we'll get our share. So it's really execution and stay inside the turtle. And obviously, a couple of buzzwords that what we'll use is, is always want to have value with what everything that we're touching. We want to have it be convenient and safe. You know, one thing Chuy's has always been known for is value, and it's one of the strongest propositions that it offers. Given the level of pricing that most restaurants have taken over the past few years, have you seen evidence that Chuy's relative value proposition has changed over the past couple of years? I don't think so. I mean, when we look at value and when we increase prices, we're always looking at our competitors and make sure that we maintain that price value gap in our menu compared to the others. Also, we look at Black Box as far as our service levels, our value, and intent to return, they have been increasing all year long. So I think we still have that value out there. One thing to note, you know, I mean, the promotional environment's coming back, so I think we'll probably see a little pressure there from promotions that others are doing. But, you know, we've had that in the past, where two for $20, you can eat in our menu all day for two for $20. So when it comes out, it kind of may be a little pressure at first, but once that gets in the mainstream, like I think it's going to here in the next year or two, you know, that pressure will subside. Also, you gotta remember, the value proposition for us is also you don't want to see any white space on my plates, which is full, full, full plates, and that's another piece of value that we stay in front of. I know you have said that you want to get back to more of a normal pricing cadence, I think in that 2.5%-3% range this year. Do you believe that you can protect the 300-350 basis points of margin improvement the company has achieved this or achieved over the past couple of years with that level of pricing? Yeah, we absolutely do. You know, and Jon, we definitely think that 2.5-3, we'll be a little shy of three, probably this upcoming year, and that's all we expect to do. Yeah, based upon kind of our inflationary expectations, where we believe, you know, labor's probably going to be in that mid-single digit, around 5%. We think commodities is probably in the lower single digits. I think we can maintain that. To grow that, you might need a little more top line, but yeah, I think... and right now, you know, our margins are some of the best in the industry. So if we want to give some of that back with lower prices to the guests, then we're good with that. Yeah. You know, we want to play in that 19%-20%- Yeah. Year in and year out, short and long term. I know, I know, Steve, traffic performance is an important metric for the company. And I know you've been very adamant over the years that growing traffic is really important. Right now, the company has had a modest decline in traffic over the past couple of quarters. Where are you in terms of...? Are you comfortable running a modest decline right now, or do you believe you need to offer promotions to increase traffic or come up with any more initiatives to kind of drive that traffic performance? I'm never comfortable not being up in customers at all. That's the lifeblood of any organization, so that's our number one thing, especially being a turtle, which is, again, staying inside your four walls. You won't see me do promotions. You won't see any price offs. Again, I think our value play within the markets that we operate is strong enough. You will see us spend a little bit more time explaining our value message, and again, full plates also is part of that, and our social media and so on and so forth. And obviously, our defining differences. You know, with Chuy's, everything's fresh. We don't have a freezer in our building, so that's a key deal for us. We want to tell everybody and make sure everybody understands that, that we also squeeze all our limes for all our margaritas. Those are the things that we need to make sure is out there even more. I know, Chuy's Knockout platform performed really well in 2023. Do you expect menu innovation to play an important role in 2024? Yeah, and we're going to continue the CKO in all of 2024. And sometimes it's old favorites, but they're always mostly two-thirds of them are always fairly new, and those will be added on to the menu as time goes by on some of them. Like example, this year, we'll have three new items in our price change that comes in February that will be added because of our CKOs. ... I know a lot of, a lot of times, you know, new product introductions or new platforms like that, you know, to really get the guests to understand or see it, you have to go out in social media or outside the four walls to make people aware of those changes. Maybe talk a little bit about how the company's marketing has evolved over the past couple of years, and how you've been more successful with social media in getting the message out to consumers. Sure, sure. We really didn't incubate it pretty much at the H2 of 2018. And then our first full year was 2019, and then the pandemic came. So we definitely do social marketing, and we do it in every single location. We also have local champions. We also have, we're on YouTube, we're also on programmatic video. We're also on, you know, DoorDash and Uber who we use. We do marketing on lapsed customers and search on those. So those are a few of the things that we've done, and the key for us is still the local store marketing and getting into the community and letting people know. So I do like all the emails that we send out to everybody that we're connected with, and that's another way that we inform them. Does the company plan to continue to invest more each year in its marketing program? Yeah, it's roughly right around that 1.4%-1.5%, and as with our growth, it's a little bit more money each year. I mean, the big thing between, especially with digital marketing, is you can really track- Mm-hmm ... when that person views your video or you know, opens your message, and if they actually went into the restaurant. So you can really see the ROI on it. And so with that, working with our advertising agency, we've been able to allocate funds to the most successful campaigns. You can also pivot on a dime. Yeah. That's key. I know catering is an important initiative for the company. I know it grew year-over-year in the Q3, and I believe you guys mentioned that it could be, you know, 4%-6% of total sales over time. Can you dig into how you expect to grow that business? Well, catering, it just grows on its own, right? Once you kind of introduce it to the market, you need to go out to the wedding venues. You need to go out to the offices and things like that, and also get on ezCater, which, you know, we're implementing ezCater right now, and will be fully implemented at the end of the third, or first quarter of 2024. And so that just kind of grows as your name gets out there. Like Steve and I were just talking, we've been to probably four-six weddings this year where Chuy's has been caterer. So, our name's getting out there. In the Q4, we did about 4.8% overall sales in catering. For the year, it's gonna be about 3.6%. So the growth has been over 17% year-over-year, so we've been very happy with that. And at 3.6% of overall sales for the total year, we're pretty close to the 4% already. So we think we can get to that 4%-6% over the next 24 months. Mm-hmm. Well, okay. And before I get into development, I wanna touch on another channel that you guys have benefited from, which is the third-party channel. I know you mentioned lapping the rollout of Uber Eats last year in the Q4. We've seen other brands, primarily limited service brands, add on aggregators and build sales over multiple years. Why wouldn't that be the case for Chuy's? I mean, are you guys considering investing more heavily in advertising on those channels and just continuing to make more people who are on those channels aware of the Chuy's Chuy's brand? Absolutely. Mm-hmm. But I mean, just to go back, we started Uber October, November last year, and so the ramp-up period was kind of through the Q1 of 2023. So we're gonna start lapping that. That was about 200-300 basis points overall in our comp sales last year. So, when we brought that on, what we saw was, and I didn't believe it at first, the guy was telling me that he thought it was gonna be mostly incremental, over DoorDash, and it has been. It's probably been 85%-95%- Mm ... incremental sales. DoorDash hasn't really come down much at all. So we are still seeing in our DSPs kind of quarter-over-quarter and year-over-year growth. What we did say was we are lapping over that, so it's gonna be a tougher lap, but we still expect that growth to continue. Sure. If I go back, so we are still advertising, you know, quarterly on DoorDash, and we had some advertising obviously in Uber as it was starting up. So we're still kind of analyzing the advertising in Uber to see how effective it is going forward. So, but we will continue to put money into those platforms. Yeah. Now, with that being said, we'd rather people go to our own platform and order, 'cause we do have a delivery kind of button on there that they can get it delivered through our own platform. Then we could keep that customer information ourselves. But right now, all of our, whether it's off-prem, DSP, catering, everything is margin neutral out the back door. So, you know, we've just kind of opened up the spigot and get the sales wherever we can. Great. Let's move to development. Steve, can you describe Chuy's unit growth potential in North America and maybe the development plans over the next couple of years? Yeah, I'll take the first part, and let Jon have the second part. Development, as far as the United States, we've always maintained that we'd have about 350 in the United States, and it's actually more than that. You know, we now have a smaller prototype that makes sense for the smaller towns, so it's definitely north of 350. You know, last year we opened four restaurants. This year, we're gonna open up six-eight, and then you'll see us in 2025 get up to basically a 10% growth from then on. With that, why don't you review our eSite? Yeah, one thing people ask us too, is what have you done because of the delays in construction? What we've done is we've actually added into the schedule of our openings, about 90-120 days extra in that development process because of all the delays. So, you know, we feel pretty good about the six-eight, although we have about two in the H1 of the year, and the rest are in the back half of the year. But what we've done is... What we expect to do over the next three-five years is really focus on five states, and five of our best states. So we went out there during the pandemic, and we were developing eSite, which is our site selection tool. We revamped our total development team. We also hired a new master broker, which is JLL, which has a national presence. In looking at the growth over the next three-five years, we said, "Give us the five states," you know, looking at our five states that have the best AUVs, the best brand loyalty, and quite honestly, the best states to operate in as far as tip wage and operating costs. So we focused on that and said, "eSite, give us how many site locations there are in these five states that won't cannibalize our existing location by more than 5% and can do at a bare minimum $3.5 million or better." Came back with about 98 sites, and so that's almost double our platform today. Now, obviously, you've got to find the site, you've got to negotiate the lease, and you've got to open the restaurant. So let's just say half of that comes to fruition, then that gives us the 10% growth for the next three-five years. And then obviously, we'll still open in the other 16 states that we're a part of. But that definitely, one thing it does is de-risk your development, because we're very confident in the revenues that we can do out of those sites, and we're very confident in the margins that we can do in those sites. And we've opened about five or six sites under that new format, and they've exceeded the revenues that eSite has said and also the margins. So we've been very happy. Yeah, and we average $4.5 million a unit, but in those five states, it's north of that. Yep. We're pretty excited about that. Talk a little bit about the recent openings, because I know what you're targeting, but it sounds, it seems like some of the recent openings have exceeded those targets quite nicely. They are. I mean, we're somewhat conservative when we do a pro forma for an opening, but the costs have gone up too. So you know, we target, we still target about a 30% Cash-on-Cash Return. You know, in some sites, it's, it's been in that 25%-30s, but overall, we're still shooting for that 30%. One thing that we've helped combat that is the strength of our balance sheet to be a little more flexible when we look at a site, because now the landlords are requiring you to do the development as far as the parking lot, the utilities, and everything on inside that, where we used to just get curbs in, where we just had to build our building on it. And so that has added to the cost of the project. Our thought process is, I mean, if we have to develop it anyway, why not own it? So let's own it and possibly do a sale-leaseback, get some of that cash back. So when we look at that, we've looked to see if we can buy it first, and then possibly do a sale-leaseback and get some of that, recoup some of that cash, and it increases our overall cash-on-cash. So that's factored in as well. But again, our cash-on-cash return, we're looking for that kind of 30%, 25%-30%. Yes, I mean, obviously, there's a lot of challenges with construction. I know you guys are expecting, I think you said six-eight this year, and, but... And there's obviously construction, permitting challenges, all those things, but what adjustments do you think you could make to, get to a higher rate of openings in 2024, 2025? I mean, I know you're saying 10%, but is there an opportunity to get to a path where you can average 10% each year, or do you think you can or do you, do you expect to get to that number of openings in 2025 and just kind of stick to that number of openings each year? No, what we expect, starting in 2025, is do 10% a year from then on. Yep. Yep, yep. And, you know, we've done years where we've done 12 openings, but we're, we're happy with that 10% number. It's, it's kind of relative, but it isn't, right? And, and so that's where we're comfortable on, on manpower, making sure planning also have time and grade for your managers to open the new units. We're very excited about our pipeline today. Mm-hmm. I mean, it's never been as robust as it is today. The issue is obviously opening and some of these delays, right? So it's really kind of the delays and also personnel, making sure you have the right people to open those restaurants. So you don't want to open it up too early. So, you know, we're not trying to be a 20% grower. I mean, 10% is a great growth item. So, that's kind of where we want to stay. When you think about newer markets, I know you talked about back from the existing markets, but when you think about going into new markets, I mean, some of the new markets you've gone in, in the recent years haven't worked out as well, like Chicago and maybe Denver. And kind of talk about some of the lessons you learned in going into some of those markets, and maybe what didn't work out as well, and maybe what lessons you learned so that when you do start to look at expansion markets... you may be able to have more success in those markets or certain markets like that. Yeah, at the end of the day, it's the site. The site it makes a difference whether it's a billboard site, and now everything's kind of going with that. So that's what the biggest thing is, the site. You know, you're gonna learn things like in the Carolinas that they don't use parking lots and parking garages, and so on and so forth like that. But after all, what we've learned is really to back up and really use data from the eSite. Use data, mobile phone data, and we've really learned a lot there. But the biggest thing is also getting a competent master broker and partner with us also. It doesn't take away from being on the ground, in the sites, working it yourself, but have a, have extra partners, an extra set of eyes on them all makes sense. Yeah, and we've talked about eSite, but we also use Placer.ai to kind of corroborate eSite. We may go to a site, and eSite says that it can do X amount of sales, but then we'll look at the surrounding area and see what those casual diners are doing and how they rank to the city, how they rank to the state, how they rank nationally. And quite honestly, we found a couple cities that you know, we probably looked over before in Arkansas that might have you know, the fourth-best Texas Roadhouse in the country, in a small little town in Arkansas. So, now we're going there. So, that's some of the technology that we have today is we're excited about, I mean, as far as picking new sites. So, you know, the company has a sizable cash balance, even after growing more. I mean, even- Mm-hmm ... we're projecting it to continue to have a pretty sizable cash balance, even after accelerating development like this. Maybe talk a little bit about capital allocation, Jon, and what you could potentially do with some of this excess cash. Yeah. First of all, that's not a bad thing, is it? No, not at all. No. But no, we do have a great balance sheet with quite a bit of cash. And what it allows us to do, like I said earlier, is a little flexibility, especially in the real estate, given you know, the costs and how they have been increased. I think they're leveling out, but they're not increasing anymore, but they're definitely not coming down yet. But we're also buying back stock. I think we finished our repurchase authorization of about $50 million in October last year. We got another authorization of $50 million starting in October of last year, and we've already bought about $23 million of that. So we've got $27 million left on that. What we'd like to do is, during the pandemic, we issued about 3 million shares in ATM to raise money, obviously. And we'd like to at least buy all that stock back, and we're pretty darn close. We're several hundred thousand shares away from buying all that back. So we definitely want to get that bought back to get down to the same level of stock we had outstanding prior to the pandemic, and then, you know, buy back the dilution going forward. I wanted to touch... I forgot one question I wanted to ask about commodity outlook. Commodity outlook for 2024. I know most are expecting beef to be inflationary, but based on what you know today, are you seeing any other signs there could be a meaningful inflation in other key inputs, or are you expecting a more normal year from an inflationary standpoint? Yeah, I think it's gonna be a more normalized year. As far as beef, we're locked in with our fajita meat through the Q3 of next year at about a 9% increase, so it is inflationary a little bit. Our beef, on the other hand, we're locked in through the Q1 just right now with a little decrease, about 2%. The rest, we think, is gonna offset each other. Chicken, we still think is gonna be kind of flat to down. And we lock in about 40%-45% of our raw commodity basket, which basically includes beef and the groceries. But the biggest wild card is produce. As you know, you know, if limes go up, 'cause we, you know, hand squeeze all of our lime, lime juice for our margaritas, so if that goes up, that has a detrimental effect on cost of sales as well as avocados. But so we don't have control over that. We buy that fresh in every location on a weekly basis. And so however, that generally fluctuates on a quarterly basis, right? Because the growing seasons, it may stop here and go to another one. So if you have a spike in prices, it generally comes back down 1/4 later. So we, we'll never increase our prices because of produce, but it does kind of fluctuate the cost of sales here and there. Your visibility on wages is pretty, pretty good, right? Minimum wages are-- or wage rate inflation is- Yeah, we had quite a few. We had about five or six minimum wage increases in states that we're in. But, I mean, I think we had, overall, it might affect the overall percentage by 10, 20 basis points, not big. Again, though, we think that wage inflation overall will probably be 4% or 5%. So the 2.5%-3% really should offset the majority of your inflation or your, all your inflation, unless we see some sort of unusual activity in produce or some- Yeah, i- Yeah. Especially in cost of sales. I think, you know, our projection is, you know, cost of sales could be flat. Might see a few basis points up in labor. I don't think we're gonna cover all labor. Depending on top-line sales, you might get some leverage elsewhere to offset it. Right. Okay. Well, hey, thank you for the time. Absolutely. Really appreciate it. Thank you, Chris. Thank you. Good insights. Thanks. Thank you.