Investment Thesis
Red Robin faces existential financial distress with negative shareholders' equity of -$106.7M, indicating liabilities exceed assets. Critical liquidity crisis (0.47x current ratio) combined with inability to service debt (0.3x interest coverage) and declining revenue (-3.1% YoY) creates severe default risk. Without dramatic operational turnaround or restructuring, the company's financial viability is fundamentally compromised.
Strengths
- Positive operating cash flow of $7M provides temporary liquidity buffer
- Net income improved 70% YoY despite remaining negative, suggesting some operational traction
- Still generating $5.5M operating income, though margins are razor-thin at 1.5%
Risks
- Negative shareholders' equity of -$106.7M represents technical insolvency and indicates balance sheet failure
- Critical liquidity crisis: 0.47x current ratio means current liabilities exceed current assets 2:1, threatening ability to pay obligations
- Interest coverage of 0.3x indicates operating income covers only 30% of interest expense - unsustainable debt burden
- Declining revenue trend (-3.1% YoY) in restaurant sector with net unprofitability (-0.6% margin)
- Minimal free cash flow of $268K (0.1% margin) provides no buffer for unexpected shocks or debt service escalation
- Long-term debt of $171.1M represents 31% of total assets with weak operational support
Key Metrics to Watch
- Shareholders' equity trend - critical improvement needed from negative position
- Current ratio trajectory - must move significantly above 1.0x for liquidity stability
- Interest coverage ratio - needs substantial improvement above 2.0x minimum threshold
- Revenue growth rate - stabilization and return to positive growth essential
- Free cash flow generation and cash balance trends
- Debt restructuring announcements or covenant violation disclosures
Financial Metrics
Revenue
378.3M
Net Income
-2.2M
EPS (Diluted)
$-0.12
Free Cash Flow
268.0K
Total Assets
543.8M
Cash
24.3M
Profitability Ratios
Gross Margin
N/A
Operating Margin
1.5%
Net Margin
-0.6%
ROE
N/A
ROA
-0.4%
FCF Margin
0.1%
Balance Sheet & Liquidity
Current Ratio
0.47x
Quick Ratio
0.33x
Debt/Equity
N/A
Debt/Assets
119.6%
Interest Coverage
0.27x
Long-term Debt
171.1M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-21T07:54:12.240163 |
Data as of: 2026-04-19 |
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