Texas Roadhouse(TXRH) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company's financial statements for the period ended June 25, 2024, show strong growth in revenue and net income, with increased assets, equity, and operating cash flow Condensed Consolidated Balance Sheets Total assets increased to $2.86 billion by June 25, 2024, driven by cash, while liabilities decreased and equity grew to $1.28 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 25, 2024 (unaudited) | December 26, 2023 | | :--- | :--- | :--- | | Total Assets | $2,861,911 | $2,793,376 | | Cash and cash equivalents | $197,454 | $104,246 | | Property and equipment, net | $1,523,393 | $1,474,722 | | Total Liabilities | $1,584,221 | $1,635,865 | | Deferred revenue-gift cards | $250,485 | $373,913 | | Total Equity | $1,277,690 | $1,157,511 | Condensed Consolidated Statements of Income Q2 2024 revenue grew 14.5% to $1.34 billion, with net income surging 46.0% to $120.1 million and diluted EPS reaching $1.79 Q2 & YTD 2024 Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,341,202 | $1,171,203 | $2,662,419 | $2,345,559 | | Income from Operations | $142,816 | $95,412 | $275,944 | $196,357 | | Net Income | $120,141 | $82,271 | $233,347 | $168,658 | | Diluted EPS | $1.79 | $1.22 | $3.48 | $2.51 | | Cash Dividends per Share | $0.61 | $0.55 | $1.22 | $1.10 | Condensed Consolidated Statements of Stockholders' Equity Total equity increased to $1.28 billion by June 25, 2024, driven by net income, partially offset by dividends and share repurchases YTD 2024 Equity Roll-Forward (in thousands) | Description | Amount | | :--- | :--- | | Balance, December 26, 2023 | $1,157,511 | | Net income | $239,065 | | Dividends declared | ($81,509) | | Repurchase of common stock | ($35,139) | | Other changes | ($2,248) | | Balance, June 25, 2024 | $1,277,690 | Condensed Consolidated Statements of Cash Flows Operating cash flow significantly increased to $377.3 million YTD 2024, supporting investments, dividends, and share repurchases, leading to a $93.2 million cash increase YTD Cash Flow Summary (in thousands) | Cash Flow Category | 26 Weeks Ended June 25, 2024 | 26 Weeks Ended June 27, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $377,347 | $288,233 | | Net cash used in investing activities | ($146,155) | ($186,004) | | Net cash used in financing activities | ($137,984) | ($168,766) | | Net increase (decrease) in cash | $93,208 | ($66,537) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, restaurant operations, credit facility status, effective tax rate changes, and year-to-date share repurchases - As of June 25, 2024, the company owned and operated 650 restaurants and franchised an additional 112 restaurants across three concepts: Texas Roadhouse, Bubba's 33, and Jaggers[18] - The company has a $300.0 million revolving credit facility maturing in May 2026, with no outstanding borrowings as of June 25, 2024[26] - The effective tax rate increased to 15.0% for Q2 2024 from 12.7% in Q2 2023, primarily due to a decreased impact from FICA tip and work opportunity tax credits as a result of higher profitability[30] - Year-to-date, the company paid $35.1 million to repurchase 222,666 shares of common stock, with $81.7 million remaining available under the stock repurchase program as of June 25, 2024[43] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q2 2024 performance to increased comparable sales and improved restaurant margin, supported by robust liquidity for growth and shareholder returns Q2 2024 Financial Highlights Q2 2024 saw total revenue grow 14.5% to $1.34 billion, net income surge 46.0% to $120.1 million, and restaurant margin expand to 18.2% Q2 2024 vs. Q2 2023 Key Metrics | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,341.2M | $1,171.2M | +14.5% | | Comparable Restaurant Sales | 9.3% | 9.1% | +0.2 p.p. | | Net Income | $120.1M | $82.3M | +46.0% | | Diluted EPS | $1.79 | $1.22 | +46.7% | | Restaurant Margin % | 18.2% | 15.7% | +2.5 p.p. | Results of Operations Q2 2024 restaurant sales increased 14.5% due to higher store weeks and 9.3% comparable sales, with improved food & beverage and labor cost percentages Comparable Restaurant Sales Growth Breakdown | Component | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Guest traffic counts | 4.5% | 4.7% | | Per person average check | 4.8% | 4.4% | | Total Comp Sales Growth | 9.3% | 9.1% | - Food and beverage costs as a percentage of sales decreased to 32.7% in Q2 2024 from 34.5% in Q2 2023, as the benefit of a higher average check offset 0.4% commodity inflation[88] - Restaurant labor expenses as a percentage of sales decreased to 32.8% in Q2 2024 from 33.6% in Q2 2023, as higher average check and labor productivity offset wage and other labor inflation of 4.4%[88] Liquidity and Capital Resources The company maintains strong liquidity with $377.3 million YTD operating cash flow, no credit facility borrowings, and planned capital expenditures for growth - Net cash provided by operating activities increased to $377.3 million YTD 2024 from $288.2 million YTD 2023, primarily due to higher net income[105] - The company expects capital expenditures of $360 million to $370 million for the full year 2024, primarily for new restaurant development[108] - The company maintains a $300 million credit facility with no outstanding borrowings and $295.3 million of availability as of June 25, 2024[110] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from commodity price volatility, especially beef, and minimal interest rate risk due to no outstanding variable-rate debt - The primary market risks are interest rate changes on variable rate debt and fluctuations in commodity prices[113] - Interest rate risk is limited as the company had no outstanding borrowings under its credit facility as of June 25, 2024[113] - The company does not use financial instruments to hedge commodity prices and relies on contracts of one year or less, making it susceptible to price volatility, especially in beef[114] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 25, 2024, with ongoing monitoring of internal control changes from a new HR system - Management concluded that disclosure controls and procedures were effective as of the end of the reporting period[116] - A new human capital management system was implemented during the quarter, leading to changes in processes and procedures affecting internal control over financial reporting[117] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course litigation but expects no material adverse effect on its business from current proceedings - The company reports no litigation that is expected to have a material adverse effect on the business[119] Item 1A. Risk Factors No material changes to risk factors were reported since the prior Annual Report on Form 10-K - No material changes to risk factors were reported since the last Annual Report on Form 10-K[120] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2024, the company repurchased 162,404 shares for $26.2 million, with $81.7 million remaining for future repurchases Q2 2024 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | March 27 to April 23 | 58,404 | $150.93 | | April 24 to May 21 | 43,000 | $163.50 | | May 22 to June 25 | 61,000 | $169.69 | | Total | 162,404 | N/A | - As of June 25, 2024, $81.7 million remained authorized for stock repurchases under the current plan[122] Other Items (Items 3, 4, 5, 6) The company reported no defaults on senior securities, mine safety disclosures are not applicable, and an executive adopted a Rule 10b5-1 trading plan - Item 3 (Defaults Upon Senior Securities): None[123] - Item 5 (Other Information): Disclosed that the Chief Legal and Administrative Officer adopted a Rule 10b5-1 trading arrangement on May 9, 2024[124][126]