BJ’s Restaurants, Inc. (NASDAQ:BJRI) Q1 2024 Earnings Call Transcript

BJ’s Restaurants, Inc. (NASDAQ:BJRI) Q1 2024 Earnings Call Transcript May 2, 2024

BJ’s Restaurants, Inc. beats earnings expectations. Reported EPS is $0.3223, expectations were $0.15. BJ’s Restaurants, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon, and welcome to the BJ’s Restaurants first-quarter 2024 earnings release conference call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.

Rana Schirmer: Thank you, operator. Good afternoon, everyone, and welcome to our fiscal 2024 first-quarter investor conference call and Webcast. After the market closed today, we released our financial results for our fiscal 2024 first 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 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 the 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, 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 by Greg Levin, our Chief Executive Officer and President; and Tom Houdek, our Chief Financial Officer. After which we will take your questions. And with that, I will turn the call over to Greg. Greg?

Greg Levin: Thank you, Rana. BJ’s delivered another quarter of improving restaurant-level margins and overall EBITDA growth, overcoming the challenging January weather which impacted guest traffic industry-wide. Our improving results reflect the benefits of the strategies we shared at our Investor Day in November. These strategies focused on driving sales through our familiar-made brewhouse fabulous culinary initiative, building our awareness over time, our people initiative around hospitality, and gold standard level of operational excellence and a welcoming contemporary ambiance to our remodel initiatives. Our holistic approach also addresses margin expansion through productivity and cost-savings initiatives. Taken together, these strategies have established a foundation for future financial and restaurant growth and the enhancement of shareholder value.

As we mentioned on our 2023 Q4 call in mid-February, comparable restaurant sales were down approximately 5% six weeks into the first quarter due to impacts from the winter storms. However, as weather largely normalized throughout the rest of the quarter, our comparable restaurant sales improved, resulting in comp sales being down only 1.7% for the quarter. The improvement in comp sales throughout the quarter came primarily from improved guest traffic. Q1 ’24 also marked our 12th consecutive quarter of beating the industry as measured by Black Box. Furthermore, our restaurant margins continued to expand and rose to 15%, representing an increase of 240 basis points from the prior year despite the January weather impact. On a reported basis, adjusted EBITDA in the quarter rose to $29.4 million, inclusive of some one-time G&A costs, which Tom will discuss shortly.

Excluding these one-time expenses, adjusted EBITDA would have been approximately $31 million, or approximately 25% higher than the prior year, and 9.2% of sales. Tom will discuss our margin growth initiatives that generated strong Q1 results in more detail in a moment. However, as we’ve stated before, we continue to expect restaurant-level margins to expand again this year based on the foundation we have established. Therefore, despite ongoing sales choppiness that we expect through the first half of 2024 as we lap the final aspects of COVID revenge dining and begin lapping the more normalized pre-COVID seasonal trends that we experienced in the second half of last year, the foundation that we are building will position BJ’s to further close the gap to our pre-pandemic restaurant-level margins.

Our solid results are a testament to our team members who continue to execute against our strategic initiatives to improve the overall dining experience for our guests, while driving impressive margin growth through our productivity and savings initiatives. To this point, both our hourly and management turnover is lower than it was in 2019 and lower than last year. Our more tenured team, coupled with our culinary strategy focused on familiar made brewhouse fabulous and our initiatives underway, has resulted in both guests and operating benefits measured by faster service times and improved social sentiment scores compared to a year ago. As we bolstered our team last year, we implemented our gracious hospitality initiative to enhance our already high hospitality standards and scores.

The first part of this initiative focused on new server scripting. With this new server scripting driving improved hospitality scores, this month, we began rolling out our enhanced service model, which balances the number of tables per server, food runners, and quality, fast expediter positions in our restaurant. These changes allow servers to get to our guests sooner so we can get the food into the kitchen faster. It also frees up our managers so that they have more time to be in the dining room to make sure we are delivering the gold standard level of operational excellence for our guests. Overall, we expect this initiative to help improve throughput in our restaurants so that we can handle even more demand. We expect the rollout of this initiative to take the better part of Q2 and Q3 of this year and will have a slight impact on training labor for these quarters.

We also continue to execute against our remodel initiative that is similarly driving improved sales and traffic. We have completed 13 remodels year to date and expect to do approximately 10 more this year. By the end of 2024, approximately half of our restaurants will either be recently remodeled or one of our newer prototypes. We also continue to open new restaurants in a balanced manner. And in Q1, we opened one new restaurant in Brookfield, Wisconsin. This is our first restaurant in Wisconsin, and it’s off to a very strong start, demonstrating the broad appeal of the BJ’s concept in so many different regions of the US, which again, reinforces our conviction that there is a white space for further expansion to 425 or more restaurants, which is approximately double our restaurant count today.

Our next two openings this year will be in the second half of 2024 and will be our newest prototype that will cost approximately $1 million less to build, bringing the investment cost down to around $6 million on average, and that’s net of landlord allowances. The new prototype will also provide greater operating efficiencies while incorporating our learnings from our remodel initiative, including lighter colors and a more contemporary bar featuring 130-inch television as the focal point. Our long-term cadence in the business is to drive top-line sales in the 8% to 10% range through a combination of 5%-plus unit growth in comparable restaurant sales in the low- to mid-single digits. However, as we’ve always said, we are going to do so with the right quality and at the right investment costs to continue to drive strong new restaurant investment returns that deliver shareholder value.

At the same time, we continue to expand margins through sales leverage and productivity and savings initiatives. Our continuous focus on optimizing the business and our solid financial cadence results in significant free cash flow, which will translate into enhanced shareholder value over the medium and long term. Now before I turn the call over to Tom, I would like to recognize three outstanding Board members that are retiring from BJ’s Board upon the June 18 Annual Meeting. They are Jerry Deitchle, our former Chief Executive Officer and Chairman of the Board; Pete Bassi, our Lead Independent Director; and Larry Bouts, who has served as our Chairman of the Audit Committee. All three of them joined BJ’s in 2004 when we had less than 30 restaurants.

These insightful board leaders helped shape our company over the last two decades and have paved the way strategically for BJ’s to develop into one of the finest casual dining concepts. We are grateful for their tremendous legacy they’ll leave and really want to thank them for their leadership and their years of service to BJ’s. Now let me turn it over to Tom to provide more detailed updates from the quarter and current trends. Tom?

Thomas Houdek: Thanks, Greg, and good afternoon, everyone. I will provide details of the quarter and some forward-looking views. Please remember this commentary is subject to the risks and uncertainties associated with forward-looking statements as discussed in our filings with the SEC. For the first quarter, we generated sales of $337 million, which was 1.2% less than last year. On a comparable restaurant basis, Q1 sales decreased by 1.7%, including the impact from heavier-than-usual winter weather in January. From a weekly sales perspective, we averaged approximately $120,000 per restaurant. Our strong and efficient restaurant execution, as Greg just outlined, in conjunction with cost savings from our margin improvement initiatives, helped BJ’s again improve margins in the quarter.

Our restaurant-level cash flow margin was 15% in Q1, which was 240 basis points better than a year ago, demonstrating again the benefits of our ongoing initiatives to drive efficiencies and the solid foundation we are building for continued growth. The winter weather in January also weighed on margins, which improved through the quarter as our sales returned to more normal and predictable levels. Adjusted EBITDA was $29.4 million and 8.7% of sales in the first quarter. Q1 EBITDA beat the prior year by more than $4 million, with a margin that was 140 basis points higher despite both more extreme winter weather and certain extraordinary cost in G&A that we’ll outline later in my remarks. We reported net income of $7.7 million and diluted net income per share of $0.32 on a GAAP basis for the quarter, which were both more than double levels from a year ago.

Now I’ll provide more details on sales trends in the first quarter. Heavier-than-usual winter storms impacted industry-wide sales through lower traffic in January. Our comparable restaurant traffic declined approximately 9% in January before recovering to negative mid-single digits in February and March. Also, during the quarter, we began scaling back the degree of menu pricing compared to last year. In January, we took a pricing round in the mid-1%, which was lower than our January 2023 pricing round by more than 200 basis points, creating a comp headwind in the quarter as we lap over last year’s elevated pricing round. As Greg mentioned, the foundation we are building allows us to take a more balanced pricing approach to maintain our traffic-driving value while adding appropriate menu pricing to deliver profit dollar and margin growth.

Our check growth moderated to the mid-single digits in Q1 compared with mid-7% check growth in Q4 of 2023. We carried pricing in the upper 5% area in the first quarter. Our late-night business continues to outperform other dayparts was as a modest check headwind as guest checks tend to be lower than other dayparts. We also continue to see some check management in our off-premise channel and alcohol sales returning to pre-pandemic incidence levels. Putting the traffic and check pieces together, our comparable restaurant sales improved from approximately negative 5% in January to negative 1% in February to flat in March. The improving comp sales levels were driven primarily from improving traffic trends through the quarter. Our comp sales performance also represents BJ’s 12th consecutive quarter of beating the industry as our comp sales were 220 basis points better than the Black Box casual dining index in Q1.

Our on-premise business remains our strongest, most profitable, and most differentiated channel, with comp sales slightly negative for the quarter but modestly positive if removing winter storm impacted results in January. Moving to expenses, our cost of sales were 25.2% in the quarter, which was 140 basis points favorable compared to a year ago and 30 basis points favorable compared to the prior quarter. Food costs were about flat quarter over quarter, with inflation of key items such as wings, salmon, and chicken breast, offset by savings from our cost-savings initiatives, including the full-quarter benefits from our new meat-sourcing program and certain reformulated sauces. Labor and benefits expenses were 37.1% of sales in the quarter, which was 50 basis points favorable compared to the first quarter of last year.

These gains were despite the extreme winter weather in January that impacted sales and deleveraged our labor line in the month. We continue to drive efficiencies with our simplified menu and AI-based sales forecasting tool used by our restaurant operators. A number of the labor efficiency metrics we track, including items per labor hour, were better this quarter than pre-COVID levels, illustrating the high level of restaurant — how high level our restaurant teams are operating at, as well as the effectiveness of our cost savings initiative to date with respect to refining and optimizing our labor model. Occupancy and operating expenses were 22.8% of sales in the quarter, which was 40 basis points favorable compared to the first quarter of last year.

We increased our marketing spend by 30 basis points from last year to build additional awareness and drive traffic to our restaurants. So the underlying benefit was 70 basis points in O&O, excluding marketing. We continue to find additional ways to save and operate more efficiently. For example, in Q1, we drove savings in our repair and maintenance expenses with a new approach to facilities planning and spending. G&A was $23 million in the first quarter, inclusive of several one-time and extraordinary charges, including more than $800,000 of legal expenses related to our shareholder cooperation agreements and $300,000 of severance from personnel changes. We also had more than $800,000 of deferred compensation expense in the quarter linked to fund performance in our deferred compensation plan, which was approximately $500,000 higher than an average quarter in 2023.

As a reminder, this is a non-cash item that has an offsetting entry in the other income and expense line in our P&L. G&A was in line with our plan and guidance when removing the extraordinary expenses in the quarter. Turning to the balance sheet, we ended the first quarter with net debt of about $39 million. We repaid $10 million of debt and ended Q1 with $58 million drawn on our revolver. CapEx was $22 million in Q1, about $5 million less than a year ago. Moving to more recent trends, comparable restaurant sales in the first four weeks of Q2 have been down modestly similar to Q1 levels. At the beginning of Q2, we rolled over another larger pricing round from last year, reducing our year-over-year check growth by nearly 300 basis points. At the same time, our guest traffic decline has been improving each month, with April being the strongest month yet, helping mitigate some of the comp sales impact from the lower carry pricing.

While there is still an element of choppiness in sales, as Greg outlined, we are encouraged by the improving traffic trends. And because of our cost savings and productivity initiatives, we expect to continue growing margins this year. Additionally, our guest value scores, which we view as a key indicator of brand health, have improved as we’ve taken less pricing this year. In fact, our Q1 value scores are up 300 basis points from Q4 levels, and our April value scores were even higher. Looking ahead and assuming recent trends continue, we expect slightly negative comp sales in Q2, taking into account the check headwind due to less pricing and improving traffic trends. As a reminder, our second quarter tends to be our busiest quarter, especially in May and June with Mother’s Day, Father’s Day, and graduation celebrations.

Our ability to drive sales and traffic in those peak weeks are critical to driving a very successful quarter. We are confident that we have the right leaders, team members, menu, and initiatives targeting gracious hospitality and speed of service in place to deliver record-setting sales in our busiest weeks of the year later this quarter. Factoring in recent trends and expectations for comps sales to be slightly negative, we expect restaurant-level cash flow margin to be in the mid-15% area in Q2. This guidance incorporates some additional food cost inflation we’ve experienced in recent weeks and changes we are making to our labor model in certain markets to increase hospitality and pace, which requires extra investment in training and will lead to inefficiencies during the rollout period.

We then expect to continue expanding year-over-year margins in the second half as we grow sales through strategic initiatives and make additional progress on our margin improvement initiatives. Our goal is to close the gap to 2019 margins and finish the year with an exit rate in Q4 approaching 16% restaurant level cash flow margins. Specific to California, we are not directly affected by AB 1228 that increased minimum hourly wages for fast food and fast casual workers on April 1. We continue to pay competitively and have not experienced increases in team member turnover or wage inflation in the state recently. In fact, our hourly team member turnover in California remained better than pre-COVID levels in April. To date, we have not taken any extra menu pricing in the state as a result of this law, but we will continue to monitor the market and will act if necessary to protect margins and profitability.

We expect G&A to return to a more normal level of approximately $21 million in Q2, and excluding the extraordinary expenses in Q1, G&A is still on track toward the $82 million to $84 million range for the full year. In conclusion, with significant cash flow from operations expanding [Technical Difficulty] healthy balance sheet, we have the financial flexibility to execute multiple initiatives to enhance shareholder value. We are focused on delivering value to shareholders through sales and productivity initiatives and through our disciplined approach to capital allocation, including for new restaurant openings and restaurant remodels, which both continue to generate strong economic returns. We have a clear path to sales and margin growth ahead.

And our long-term strategy and the strong consumer appeal for the BJ’s concept position us well to continue building on our successes and enhancing shareholder value. Thank you for your time today, and we’ll now open the call up to your questions. Operator?

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Q&A Session

Operator: [Operator Instructions]. Our first question is from Alex Slagle with Jefferies.

Alex Slagle: Thanks. Hey, guys. Congrats. Good momentum here. The margin performance really stood out. And especially relative to the expectations we had in the low-13% range for restaurant level margins, I mean it’s up and down the restaurant expense categories. So I just wonder if you could size up the contributing factors a little bit more. I realized it’s not just one thing. I mean, there’s sales leverage and cost efficiency measures in a lot of places, but just trying to get a better feel for what changed and how sustainable some of these dynamics are.

Thomas Houdek: Sure. Thanks for the question, Alex. And it really was strong performance across the lines, as you mentioned. Sales did recover nicely. So we saw a pickup in sales, which was consistent. But with that, we also had a good quarter in terms of where commodities sat. They came in a little under where we were expecting. So that did help some of the initiatives that we rolled out, certainly offset and some of the inflationary pressures. Where we really saw some nice leverage as well is across labor. We operated really well in our restaurants. Once we got through the winter weather, we had some really strong restaurant operations that were very efficient in terms of the labor scheduling. So when we saw the sales became predictable, we really had a nice flow through in terms of labor.

And then finally down to O&O, seeing the repair and maintenance expenses come down, we have been more conservative in terms of what we’ve been spending in terms of third-party delivery promotions there. So we’ve really refined what we spend on and where we’re going to cut and find some efficiencies. So more to come, but I appreciate the question. It really was outperforming what even our expectations were in terms of what we’re able — our restaurants were able to operate at.

Alex Slagle: Yeah, that’s great. And so some of the labor scheduling, I mean, is there more to do there, like tech-enabled labor scheduling pieces that maybe you haven’t rolled out? I just wasn’t sure where you were in those things, but good job working through all the volatility through the weather.

Thomas Houdek: Yeah, thanks. Last year, we had rolled out to our restaurants an AI-based sales forecasting tool, which helps both prepare their labor schedules but also how much food to prep. So those continue to be refined, and we’re seeing better outcomes from those tools and getting our sales forecast even tighter at the restaurant level. So that is a continual process of refining and making that better and better. So yeah, some of that was included, if you think of Q4 and Q1, the benefits of that tool are just getting better.

Greg Levin: So, Alex, a big part of that, and Tom mentioned it, really is kneeling down your weekly forecast. We’ve said this before and you and others understand that, if you have the right forecast in place, the ability to manage against that both on cost of sales because you’re prepping correctly, works for you and gives you a huge benefit in food costs against your theoretical. And then the same thing for labor. As we continue to work labor, we — right now, I want to continue to work the — our AI tool in regards to the in and out times and getting better around the shoulder. I think there’s still opportunity in our restaurants to be more efficient. Really around that shoulder period, as we mentioned on the call today, we are doing some changes which are going to allow our service to take care of our guests even better.

But one of the big benefits on that is really getting more of our managers into the dining room area. And by being in the dining room area, we can see the shoulders of the shift and how they’re transpiring through the day. And that’s a huge unlock for us. That’s going to allow us, I think, some additional benefits over time. But it is a shift in our business, and it’s going to take a little bit of Q2 and Q3 for us to work through that. But I do believe over time, there’s additional labor benefit in regards to efficiency, and that should also allow us to drive top-line sales by being more efficient and more effective.

Operator: Our next question is from Andrew Wolf with Loop Capital Markets.

Andrew Wolf: Great, thanks. I wanted to ask about your goal of getting to the 16% restaurant-level cash flow, which was 2019. And I just wanted to point out the obvious, like the five-year period before that, that margin was really more like 17% to 19%. So I just kind of want to ask, is there any structural reason post-COVID for 17% to 19% to be or not be in play? I mean, I particularly think about indoor dining, in restaurant dining versus off-prem is maybe a structural reason. The old margins may not be attainable. If everything else wasn’t equal, obviously you’re doing a lot on the cost side. So I guess maybe you could just help us think about a longer-term goal on the margin side from the restaurant level.

Greg Levin: Yeah. Andrew, great question. Where I would say we are today, and I think businesses in general, restaurant space, maybe limited service in California might have a little bit different model right now. But where we are today is the additional dollar of sales is going to flow through somewhere in that 50% range or so. We used to always talk about that on the call. So we think about driving, and the reason for that today is we’ve gotten through all the inflationary pressures that came through coming out of COVID from ’21 into ’22. So we’ve kind of reset that basis there, and now we’re dealing with, for the most part, more normalized inflation. So with more normalized inflation, as we can drive that incremental sales, we should be able to get that incremental dollar.

And that incremental dollar should continue to move the margins up. And our first step is getting back to where we were in ’19. And then from there, it’s continuing to drive sales and getting our margins above that. The one area that is different today, it’s about 130 bps or so, maybe give or take a little bit more in our P&L, is third-party delivery charges. So when you look at our numbers in general, they’re going to be 130 different basis points than maybe where they were in ’17 and ’18 and ’19. But other than that, we should be able to drive higher sales from that and ultimately end up with greater dollars per restaurant week. That’s one of the things that we’ve got our eye on, is how do we get to our dollars per restaurant week being the same as where they were in 2018 or 2019.

And that’s what we take to the bank, but obviously we want both of them. And where we are because of the initiatives that we put in place and the things we’ve done, it’s allowed us to get back to a very leverageable business, which is I think what we saw in the first quarter. And even Tom mentioned it, it would have been interesting, frankly, to see how good our margins would have been with a normal Q1 or with a normal January and even into the first week of February because January is a big month for us. It’s a really big month for us. Same with February in regards to President’s Weekend and Valentine’s Day. So the 15% margin that we’re happy with, we’re not satisfied, I think we left them on the table because of weather related. And I think as we go into Q2, I think there’s opportunities to continue to expand that.

Operator: Our next question is from Jeffrey Bernstein with Barclays.

Unidentified Analyst: Hi, this is on for Jeff. Appreciate you taking the question. Just a bigger-picture question on consumer behavior, we’ve heard a lot of companies report over the past week noting caution on spending and there’s a lot of check management going on, particularly with lower income consumers. Just wanted to see how you would respond in this environment. Obviously, you’re seeing the promotional environment ticking up. A notable competitor of yours just added a premium burger to their value platform. So just how do you maintain your brand equity while also acknowledging that maybe the consumers are getting a little bit more cautious? And how do you maintain your value proposition? Thanks.

Greg Levin: Yeah. So just when we look through our segmentation of our guests and look at our data, it does tend to be that the lower-income consumer seems to be doing a little bit more check management maybe than the other consumers. And when you look at that, around consumers around $50,000 of spend or less seems to be, again, a little bit different in their average check and how it’s acting versus some other consumers. So there’s a couple ways that we’re going about it. And I think you’re seeing all different companies do it differently. One is, as Tom mentioned, we are not adding as much menu pricing as we’ve done before. We think we are in a position today that we can improve traffic and drive margins. And I think the health of traffic is a greater importance today versus getting back to where margins were even in ’17, ’18 or ’19.

And I think because of that, we can drive people in and leverage that part of our business. At the same time, in regards to our marketing and driving awareness, we do have our, what I would call good price point out there, which is the affordability side of things, whether it’s yesterday. Wednesday is our loaded burger day. So loaded burgers are $11 or $12, depending on where you are in the US, with unlimited fries. So it’s a great deal that comes in. We have half off large pizza Mondays. We also have our lunch specials that start at $12. So we have areas of our menu that continue to have great price affordability, which we call our Daily Brewhouse Special. And then we’ll lean into at times different promotional areas. We haven’t leaned into it too heavily, but they might be things such as a $10 off $40.

We’ve done that before. We’re not looking to get hugely on the deep discount to reach out to them. The other side of this as we continue to work with the lower-value guests as well is we drove a lot of incremental guests into our loyalty program in Q1. And that loyalty program, that database, I think it increased by over 10% or so in the corridor, 10% increase. That allows us to reach out to them with special offers. And then one of the things that we talked about at our Investor Day was our three-year culinary strategy. And as part of that three-year culinary strategy, knowing that we wanted to have the WOW upgrades, which are things like our surf and turf, but we also want to lean into a value portion of it, which I believe is around 20% to 30%, and that includes right now certain appetizers that we put on that are under $10, as well as looking at a couple other newer menu items that are in the value category.

So we’re going to play into that, but we’re going to play into it that works for BJ’s and differentiates BJ’s and what we’re known for. We’re not looking to do a buy one, get one or anything else from that perspective, but again, tell people about the great price points we have at BJ’s. And then I’ll also talk about the fact that we are experiential dining. And when guests are looking for a, what we would call maybe a better dining experience where they’ve got that hour of time, we want to give them a higher-quality dining experience for the right price point that is affordable for everyone.

Operator: Our next question is from Aisling Grueninger with Piper Sandler.

Aisling Grueninger: Hey, guys. Congrats on the results. My question is on the late-night daypart. I know in the last earnings call, you’ve mentioned that the late night daypart was your best performing with comp sales around mid-single digits for the quarter. I was just wondering if you could update us on this daypart, and also wondering if you expect with the remodels in the new bar area, if there’s room for this daypart to continue to grow. Thanks.

Thomas Houdek: Sure. Thanks, Aisling, for the question. Yeah, this is — if we look across the board, both on-premise especially, but even off-premise, just a great performing daypart for us. We did expand hours in the middle of last year, and it’s continuing to pick up steam. So, yeah, positive comp sales for the quarter, even positive traffic for the quarter in Q1, even with the weather in January. So, yeah, if you think of what’s core to BJ’s, it really is the bar business and having the great bar statement as we’re touching in all these remodels. And as we go through our new version of the prototype, it will have the 130-inch TV. So this is a core attribute of BJ’s, and great to see both even on and off-premise, it’s a business that is really healthy for us right now.

Greg Levin: To add, I think this is really important, is you have to lean into areas that you have authority in your business. And that late night and that bar business, that’s something that’s very unique and differentiated to BJ’s that a lot of other concepts can’t necessarily talk about, especially in the casual dining space. So as we continue to think about our awareness amplification and what we do differently, those are areas that we’re going to continue to lean into to drive that part of our business, because again, it’s a differentiating factor. It’s one of the reasons that guests come and use us.

Aisling Grueninger: Great, thank you. My other question is just where marketing came in as a percent of sales in the quarter.

Greg Levin: I think it’s 19, 18 —

Thomas Houdek: 1.7%, actually.

Aisling Grueninger: Great. Thank you. I’ll pass it back.

Operator: Our next question is from Nick Setyan with Wedbush Securities.

Nick Setyan: Thanks, and congrats on the margin trajectory here. First question is really on the other OpEx. That had been an expense line item that had been pretty sticky. And it seems like even with the marketing expense, I think you guys saw like 60 bps or 70 bps of improvement year over year, ex-marketing on that line. So what exactly are you guys focused on in that line? And is there more that can be done on that line to get to see even more leverage going forward. Because your Q2 guidance, even if you assume less leverage on labor, you would have to assume a lot less leverage on other OpEx to get that mid-15%-ish type of restaurant-level cash flow.