BJ's Restaurants, Inc. (BJRI) Earnings Call Transcript & Summary

Hello and welcome everyone to today's BJ's Restaurants Q3 2026 earnings release and conference call. [Operator Instructions] Note that this call is being recorded and that we are standing by if you should need any assistance. It is now my pleasure to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead. Thank you.

Thank you, operator. Good afternoon, everyone, and welcome to our fiscal year 2026 third quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2026 third quarter. You can view the full text of our earnings release on our website at www.bjsrestaurants.com. I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information or future events or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission. We will start today's call with prepared remarks from Lyle Tick, our Chief Executive Officer and President, followed by Todd Wilson, our Chief Financial Officer, after which we will take your questions. And with that, I will turn the call over to Lyle. Lyle?

Thank you, Rana. Good afternoon, everyone. And thank you for joining us to discuss our third quarter financial results, operating performance, and outlook. Q3 was an outstanding quarter for BJ's, outpacing internal expectations and underscoring both the progress we've made over the past 2 years and the sustainability of our growth drivers. We delivered another quarter of strong traffic growth with moderating check compression as anticipated and importantly continued profit growth as our operators efficiently converted top line gains into strong margin expansion. This was our 9th consecutive quarter of sales and traffic growth and our 8th consecutive quarter of profit growth. Same-store sales increased 8.1%, driven by 8.3% traffic growth. On the profit side, restaurant-level operating profits increased $11.5 million and margin expanded 220 basis points to 14.7%. Adjusted EBITDA increased $10.3 million, and adjusted EBITDA margin increased 240 basis points to 8.8%. A few notable highlights from the quarter. First, our operators continue to elevate the guest experience as demonstrated by ongoing improvements in our Net Promoter Scores, while maintaining exceptional operational discipline reflected in the flow through of our sales outperformance. Throughout the year, I have been very pleased with our team's discipline managing the controllables, labor, waste, and comp food and beverage, while remaining focused on executing our strategy. Second, Q3 reinforced the effectiveness of our growth drivers working together to drive performance. The Pizookie Meal Deal, or PMD, continues to resonate as a powerful everyday value platform, driving both new guest acquisition and repeat visits. Our seasonal Pizookie platform was anchored in 2 ways: returning fan favorites, S'mores and the Spooky Pizookie, both in their 3rd year, and we continue to support menu and product improvements with a focus on our handheld category. Third, as previewed in our Q2 call, check compression moderated in Q3 as growth became more evenly distributed across our growth drivers. And fourth, our marketing plan continues to work effectively and efficiently. We continue to be agile, optimizing channel and messaging mix while maintaining the quality of our products, maintaining a consistent reinvestment rate when looking at the year as a whole. The results continue to reflect the progress our marketing and culinary teams are making in aligning product, messaging, and go-to-market strategies. Overall, I'm proud of our third quarter performance and our outlook for the year. Our 2026 performance is delivering ahead of expectations. The shape of that performance throughout the year has been consistent with both what we expected and guided, all of which gives me further confidence that our strategies are working and underscores the durability of our progress. Looking at Q4 specifically, performance to date has been in line with our expectations and guidance as we continue to drive growth, building on a strong Q4 2025. Looking at the consumer, demand remains resilient as we continue to grow traffic while moderating check compression and drive interest in new and renovated menu items. Over the past 2 years, we have clarified our positioning, organized behind our 4 strategic pillars, and refined our growth drivers, all focused on building a stronger BJ's and delivering sustainable and profitable growth. Over that timeframe, we have increased average unit volumes roughly 10% to $6.7 million, expanded average unit profit by roughly 24%, and improved NPS by more than 600 basis points, strengthening a robust foundation for enduring growth. Looking ahead, our strategy remains centered around ensuring our restaurants continue to be places our team members are proud to work in and our guests are excited to return to. Everything starts with our team members. They bring our brand promise to life every day, and we're committed to ensuring they have the tools they need to deliver for our guests. We just returned from our General Manager Conference and the energy and enthusiasm were palpable. Our managers are aligned, engaged, and committed to getting better every day, 1 of our core foundational values. We spent our time together focused on leadership development, driving One BJ's Way consistently across our restaurants, aligning around clear expectations of what great looks like at BJ's, and ensuring our teams have the operational support they need. From point-of-sale upgrades to a new learning management system, we continue to invest in practical tools that make our operators more efficient and consistent. On the menu front, our 3 core pillars, Pizookies, PMD, and product news, continue to drive our calendar as we optimize to balance traffic and mix. The team has done a fantastic job of building a craveable Pizookie pipeline with clear visibility through 2027, while also developing the supply chain agility to capitalize quickly on emerging cultural trends as they present themselves. I encourage everyone to try our holiday lineup featuring our Nutella Gone Bananas Pizookie and our Brown Butter Biscoff Pizookie. They are both absolutely delicious and out now. The Pizookie Meal Deal continues to deliver, driving both new customer acquisition and repeat visits. It is a BJ's ownable everyday value platform that reinforces 2 of our signature equities, menu variety and Pizookie. Across our core menu categories, I remain pleased with the work completed to date and excited about what lies ahead. Across pizza, burgers, and chicken sandwiches, each revamped category is generating higher incidence, increased sales, higher average checks, and stronger dollar margins. This is inclusive of more than $1.5 million reinvested back into product quality. This holiday season, we're excited to feature a 16-ounce Hawaiian ribeye, which is a delicious upgrade and twist on our most popular steak for the holidays, alongside a shareable sides platform led by Truffle Mac and Cheese. Based on initial guest resonance during testing, we believe this shareable side platform has legs as we continue our menu work into 2027. As we advance our work across the menu, we will continue delivering a more craveable, compelling, consistent, and profitable offering over time. I look forward to sharing further updates in the coming months as items move through testing and validation. Ensuring the atmosphere across our 219 existing restaurants remains a competitive advantage is an imperative for BJ's. We continue to invest in the existing fleet to ensure our team members have the facility and equipment they need to deliver on our high standards and that our guests visit restaurants they're excited to come back to. We've made material progress on our deferred facilities work with a focus on sharpening our replace versus repair strategy to ensure we are solving and not band-aiding problems. This is supported by a diligent preventative maintenance program as we continue to drive a shift towards planned versus unplanned repairs and maintenance. Turning to new unit development, we are just a few weeks away from opening our Joliet, Illinois location, followed by Buckeye, Arizona in Q1. Both will showcase a meaningfully refreshed expression of the BJ's brand. These markets represent a balanced mix as Buckeye expands our footprint in an established high-performing market, while Joliet provides an opportunity to build brand awareness and drive operational leverage in a developing market. We continue to build our pipeline and expect to open a handful of additional units in 2027 as we continue to refine the prototype and apply a right size, right place, right cost approach to our next chapter of unit growth. In closing, 2 years into our journey to unlock the full potential of BJ's Restaurant & Brewhouse, our results reflect clear and measurable progress. With AUVs up over $500,000 and average unit profit up $220,000, BJ's now averages over $1.1 million restaurant-level profit per restaurant, and we're building from a significantly stronger foundation. We remain guided by our 4 strategic pillars and focused on making BJ's better every day as we enter our next chapter of growth. Before closing, I want to thank all of our BJ's team members across our restaurants and the Restaurant Support Center for their passion and commitment. We talk often about being better every day and stronger together. And once again in Q3, our teams took care of each other, took care of our guests and our restaurants, and delivered another great result for BJ's. Thank you, and I will now turn it over to Todd for more color on our financial results and outlook.

Thank you, Lyle, and good afternoon, everyone. We delivered another strong quarter of results led by 8.1% comparable restaurant sales growth. Revenue increased by $28.5 million, and restaurant-level operating profit increased $11.5 million, delivering more than 40% incremental flow-through and 220 basis points of margin expansion. And adjusted EBITDA increased by $10.3 million. Total revenue for the quarter was $358.6 million, an 8.6% increase versus last year. The comparable restaurant sales increase of 8.1% was led by 8.3% traffic growth, partially offset by a 0.2% decline in average check. Our sales and traffic momentum was driven by continued execution against the proven growth drivers Lyle highlighted earlier. Growth was broad-based with gains across every day of the week, daypart, and revenue center. We outperformed the Black Box casual dining national benchmarks on both sales and traffic, led by traffic outperformance of more than 800 basis points, with our outperformance extending across all geographic regions. The average check decline of 0.2% was in line with our expectations and a meaningful step forward from the 1.8% decline reported in the second quarter. We are seeing our menu renovation work lead favorable shifts toward pizzas, burgers, and chicken sandwiches, where check contribution improved 40 basis points from the second quarter to the third. Combined with initial stabilization in our higher tier steaks and slow roast offerings, these efforts are driving clear sequential momentum in our check trajectory. Turning to restaurant profitability, restaurant-level operating profit was $52.9 million, and margins increased 220 basis points to 14.7%. Continued progress on our gross-to-net initiative contributed to restaurant-level margin expansion. Total comps and discounts declined 50 basis points as a percentage of revenue, reflecting stronger operational execution and more effective deployment of promotional offers while supporting strong traffic growth. Cost of sales was 25.3%, a 40 basis point improvement versus last year. Commodity inflation eased to approximately 2% in the third quarter, a reduction from the 5% we experienced in the second quarter. Operationally, we continue to reduce comp food and beverage incidents, contributing to the overall gross-to-net improvement. Our menu renovation work also contributed to the gains as the new pizza, burgers, and chicken sandwiches deliver an improved margin profile. Total labor expense improved by 90 basis points to 36.2%. Our operators continue to execute with discipline, delivering the leverage we expect with the gains in sales while continuing to improve guest satisfaction measures. These results include an increased restaurant bonus expense of 10 basis points. This additional compensation is well earned and deserved as our operators continue to deliver great work and results. Occupancy and operating expenses were 23.8%, a 90 basis point improvement versus last year. I would highlight 2 items within this category. First, overall the margin improvement was led by leveraging our fixed costs over the significant increase in sales. Second, marketing spend in the quarter increased $0.9 million, a 13% increase versus last year, and a 10 basis point increase as a percent of revenue. However, as Lyle noted, we expect our marketing investment as a percent of revenue on a full year basis to be consistent year over year. The increased dollars supported our proven growth drivers, PMD, Pizookies, and product news. Our marketing team has continued to drive significant traffic growth with improved efficiency and investment return. General and administrative expenses were 6.6% of revenue, a reduction of 20 basis points versus last year. On a dollar basis, G&A increased $1.3 million, primarily reflecting higher incentive compensation expense connected to our strong performance, offset by lower deferred compensation expense. Driven by our strong financial results through the first 3 quarters, we now expect full year results to exceed target for incentive compensation. As a result, we recorded an incremental $1.7 million expense in the third quarter compared with a $0.6 million reduction in the quarter last year. This represents a $2.3 million year-over-year increase in expense. Based on our current outlook, we anticipate $0.6 million of incremental expense in the fourth quarter. Partially offsetting this increase, deferred compensation expense declined approximately $1.2 million. As a reminder, this expense reflects changes in the value of the program's underlying investments in which there is exposure to the broader equity markets and is generally offset in other income. Adjusted EBITDA increased to $31.4 million compared to $21.1 million last year, representing approximately 36% flow-through on incremental revenues. Turning to capital allocation, our strong cash generation supported investment in the business, share repurchases, and debt reduction. First, we invested $19.9 million in capital expenditures, focused on supporting our current 219 restaurants. We remodeled 2 restaurants during the quarter, bringing our total for the year to 12, and expect 1 more in the fourth quarter as we prepare to accelerate the pace in 2027. In addition, we are investing in the 2 new restaurants that are under construction. Second, we repurchased and retired approximately 17,000 common shares for $1 million. Third, we repaid $28 million of debt. We ended the quarter with net debt of approximately $4 million, a substantial reduction from the $61 million we carried at the start of the year. Turning to our 2026 financial outlook, led by our consistently strong results, we are again raising guidance for select financial metrics. We now expect comparable restaurant sales growth of approximately 4.7% compared with our previous range of growth of 3% to 4%; restaurant-level operating profit in the range of $233 million to $237 million compared with $228 million to $235 million previously; adjusted EBITDA in the range of $149 million to $154 million, up from $145 million to $152 million previously. We now expect capital expenditures to be approximately $80 million compared to our prior range of $85 million to $95 million. Our share repurchase guidance remains unchanged at up to $50 million, subject to market conditions, and reflects our financial ability and willingness to increase purchases meaningfully if market conditions warrant. We repurchased approximately $9 million of shares through the third quarter and an additional $1.6 million in the fourth quarter to date. I'll also provide additional color for modeling purposes, starting with our raised guidance for comparable restaurant sales growth to approximately 4.7%. As we discussed last quarter, we expect to grow comparable traffic and sales in the fourth quarter, even as we lap strong traffic growth last year. Our outlook includes an approximately 100 basis point headwind in the fourth quarter from unfavorable shifts for Halloween and Christmas, as many others in the industry have noted. Additionally, we expect occupancy and operating expenses to be approximately 23% of revenue in the fourth quarter, compared with 22.6% last year. Approximately 20 basis points of the anticipated increase versus last year reflects higher marketing spend, with the remaining increase driven by general liability costs and repair and maintenance expense as we make progress toward our gold standard facility target. In summary, our third quarter results were excellent. Year to date, comparable restaurant sales have grown 5.6%, restaurant-level margin expanded 80 basis points, and adjusted EBITDA has increased $15 million. These results demonstrate our strategies are working and our team is executing at a high level. We are converting strong traffic and sales growth into higher profitability while continuing to invest in our restaurants and strengthen our balance sheet. These results are only possible because of the hard work of our restaurant, field leadership, and support center teams. Thank you and congratulations. As we work to close a great year in 2026, we remain focused on executing our core strategies to continue our growth in 2027 and beyond to deliver value for shareholders. With that, we will now open the line for questions. Operator?

[Operator Instructions] Our first question will come from Brian Bittner with Oppenheimer & Co. Please go ahead.

This is Mike Tamas for Brian. The commentary on the fourth quarter so far being in line with the guidance, are you trying to say that it's in line with the full year guidance or in line — you know, that would get you to the full year guidance, because I think the math would imply that the fourth quarter would be in like the high 1% range. So if you could just clarify that. And then maybe even with the holiday shift, it does, I think, suggest that the trends are maybe moderating a little bit. Is there anything that you're seeing that's giving you a little caution? Or are you just trying to play it a little bit safe right now? Thanks.

Yes, sure. Look, I mean, I'll start and then Todd can talk to you. Look, this is Lyle, by the way. You know, I feel really good about Q4. You know, I feel great about the programs that we're putting into market, which actually just kind of landed today. We're building on what was obviously a really strong Q4 2025. And we're growing traffic, we're moderating check, and building a stronger business. So I feel great about that. I think the thing that I also try and keep myself and the teams focused on is, more importantly, when I take a step back, I feel really good that over the past couple of years, what we've done is build multiple growth drivers that are now working together to develop a stronger foundation, which has allowed us now over 2-plus years or 9 quarters to be lapping positively and growing traffic and growing our business independent of what the lap looks like. And I don't see Q4 being any different. So overall, I feel good about it, particularly as you look at the 1- and then the 2-year stack.

Yes, the only thing I'd add on top of that is just in terms of the guidance. We've tried to be really thoughtful about how we issue our guidance. We've raised it now twice this year in, I think, very thoughtful steps. I think I'd say broadly all of our comments, what you referred to with Lyle as well as mine, we feel good with the guidance that we put out for the full year. Obviously, we'll do our best and our expectation is that we'll deliver that and take a step up from there.

All right, thank you. And then I just want to make sure I heard you right, Lyle. I think you said you're going to have 1 unit opening in the fourth quarter, and then another 1 in the first quarter from those initial set of units, and then a total of a handful in '27. So 1, is that right? And then 2, how many is a handful? Is that 2, 3, 4, 5-plus? If you could just sort of help us frame that up, thanks.

Yes, sure. So, yes, you heard me right. There's 1 in Q4. There'll be 1 in Q1. And then, as you look at a handful, the only reason I'm cautious about this is because with development, best laid plans and then permitting and construction and all of that. But you're probably talking in that mid-single digit range. So around that 4 or 5 is a good place to be thinking for next year.

Awesome. Thanks. Congrats, guys.

Thank you.

Thank you.

Thank you. Our next question comes from Jeff Farmer with Gordon Haskett. Please go ahead.

Hey, Jeff.

Just wanted to quickly follow up on the Q4 same-store sales. So I hear you loud and clear on most of the pieces of this, but having said that, are there sort of notable sequential shifts relative to Q3 that we should be aware of as it relates to pricing, traffic, mix, anything? I heard you on the 100 basis point calendar shift headwind, but anything else that would sort of push that 1-year and 2-year number down?

I mean, the only thing that you'd be looking at is obviously Q4. If you look at Q4 last year versus Q3 of last year, Q4 was, you know, we obviously had very strong performance in Q4 of last year. So I mean, I guess, you know, that would be the only thing. But again, you know, for me, at least, I'm looking at the business as: Are we building a foundation of a business that independent of what the quarter we're lapping looks like, we have the tools and the ability to consistently grow our business over the course of, you know, the past 2 years plus the years to come? And that's what we're focused on. So, you know, I feel good about what we're seeing in Q4 so far. But the only thing would be the fact that the lapping Q4 is different than the lapping Q3.

I'll chip in 1 more time, Jeff. I'd make the point of, you know, our annual guidance, if you think about the change, the raise in our annual guide, it really reflects the way we beat our expectations in Q3 flowing forward. We really didn't make significant changes to our Q4 expectations. So our expectations for Q4 have been very consistent.

That's helpful. And then just as a follow-up, you touched on it, but you introduced the holiday menu today. And I'm just curious in terms of how you guys are sort of leveraging menu news. Obviously, you've seen your peers have had some success in doing that, but just as it relates to the strategy in leveraging the menu news in terms of driving traffic or attracting new guests, is there something new or different that you guys are doing now?