Texas Roadhouse(TXRH) - 2024 Q3 - Quarterly Results

Texas Roadhouse, Inc. Q3 2024 Earnings Release Financial Highlights Texas Roadhouse reported strong financial results for the third quarter and first 39 weeks of 2024, with significant year-over-year growth in total revenue, income from operations, and diluted earnings per share, driven by robust comparable restaurant sales growth and improved restaurant-level margins Financial Results (in thousands, except per share amounts) | Metric (in thousands, except per share amounts) | 13 Weeks Ended Sep 24, 2024 | 13 Weeks Ended Sep 26, 2023 | % change | 39 Weeks Ended Sep 24, 2024 | 39 Weeks Ended Sep 26, 2023 | % change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenue | 1,272,999 | 1,121,752 | 13.5% | 3,935,418 | 3,467,311 | 13.5% | | Income from operations | 102,023 | 73,859 | 38.1% | 377,967 | 270,216 | 39.9% | | Net income | 84,412 | 63,788 | 32.3% | 317,759 | 232,446 | 36.7% | | Diluted earnings per share | 1.26 | 0.95 | 32.5% | 4.74 | 3.46 | 37.0% | Third Quarter (13 Weeks) Performance In the third quarter of 2024, the company achieved an 8.5% increase in comparable restaurant sales and a 32.5% rise in diluted EPS, with restaurant margin improving to 16.0% from 14.6% year-over-year, driven by higher sales and improved labor productivity, which offset inflation, while also opening 7 new company restaurants and 3 franchise locations Q3 2024 Performance | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Comparable Restaurant Sales (Company) | 8.5% | 8.2% | | Average Weekly Sales (Company) ($) | 149,176 | 138,668 | | Restaurant Margin % | 16.0% | 14.6% | | Diluted EPS | $1.26 | $0.95 | - Capital allocation for Q3 2024 included $91.1 million in capital expenditures, $40.7 million in dividends, and $9.6 million in common stock repurchases[2] Year-to-Date (39 Weeks) Performance For the first 39 weeks of 2024, comparable restaurant sales at company restaurants grew by 8.8%, and diluted EPS increased by 37.0%, with restaurant margin expanding to 17.2% from 15.4% in the prior year, benefiting from higher average guest checks and labor productivity, and 22 company and 9 franchise restaurants were opened during this period 39 Weeks 2024 Performance | Metric | 39 Weeks 2024 | 39 Weeks 2023 | | :--- | :--- | :--- | | Comparable Restaurant Sales (Company) | 8.8% | Not specified | | Average Weekly Sales (Company) ($) | 155,807 | 144,583 | | Restaurant Margin % | 17.2% | 15.4% | | Diluted EPS | $4.74 | $3.46 | - Year-to-date capital allocation included $246.5 million in capital expenditures, $122.2 million in dividends, and $44.7 million in stock repurchases[3] Management Commentary and Strategy CEO Jerry Morgan highlighted continued traffic growth across all brands, attributing it to the company's operators, and looking forward, management is confident in its strong development pipeline for 2025 and a planned acquisition of 13 domestic franchise restaurants, which are expected to drive long-term shareholder value - Management reported continued traffic growth at each of its brands in a competitive environment[4] - The company has a strong development pipeline for 2025, with 10 new company restaurants already under construction[4] - The company has tentatively agreed to acquire 13 domestic franchise restaurants, with a targeted closing date at the beginning of the 2025 fiscal year[4] Business Outlook The company provided an updated outlook for the remainder of 2024 and initial guidance for 2025, expecting commodity inflation below 1% and wage inflation around 4.5% for 2024, and anticipating positive comparable sales growth, commodity inflation of 2-3%, and wage inflation of 4-5% for 2025, with significant capital expenditures planned for both years - Comparable restaurant sales for the first four weeks of Q4 2024 increased by 8.3% compared to 2023[5] - A menu price increase of approximately 0.9% was implemented in late September 2024[5] 2024 Outlook Management updated its 2024 outlook, now expecting commodity cost inflation of less than 1% and an effective income tax rate of approximately 15%, while reiterating expectations for positive comparable sales growth, store week growth of about 7.5%, and total capital expenditures between $360 million and $370 million 2024 Outlook | 2024 Outlook Metric | Expectation | | :--- | :--- | | Commodity cost inflation | < 1% (Updated) | | Wage and other labor inflation | ~4.5% (Updated) | | Effective income tax rate | ~15% (Updated) | | Store week growth | ~7.5% (Reiterated) | | Total capital expenditures ($) | $360M - $370M (Reiterated) | 2025 Outlook The initial 2025 outlook projects positive comparable restaurant sales growth and store week growth of approximately 5%, which includes a 2% benefit from the planned franchise acquisition, with anticipated higher inflation, commodity costs rising 2-3%, and wages increasing 4-5%, and total capital expenditures expected to be approximately $400 million 2025 Initial Outlook | 2025 Initial Outlook Metric | Expectation | | :--- | :--- | | Store week growth | ~5% | | Commodity cost inflation | 2% to 3% | | Wage and other labor inflation | 4% to 5% | | Effective income tax rate | 15% to 16% | | Total capital expenditures ($) | ~$400 million | Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including the Statements of Income, Balance Sheets, and Statements of Cash Flows, providing a detailed view of the company's financial position and performance for the periods ended September 24, 2024 Condensed Consolidated Statements of Income The income statement shows a 13.5% increase in total revenue for both the 13-week and 39-week periods ending September 24, 2024, with net income attributable to the company growing 32.3% to $84.4 million for the quarter and 36.7% to $317.8 million for the 39-week period, reflecting strong operational leverage Condensed Consolidated Statements of Income (in thousands) | Metric (in thousands) | 13 Weeks Ended Sep 24, 2024 | 13 Weeks Ended Sep 26, 2023 | 39 Weeks Ended Sep 24, 2024 | 39 Weeks Ended Sep 26, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | 1,272,999 | 1,121,752 | 3,935,418 | 3,467,311 | | Income from operations | 102,023 | 73,859 | 377,967 | 270,216 | | Net income attributable to TXRH | 84,412 | 63,788 | 317,759 | 232,446 | Condensed Consolidated Balance Sheets As of September 24, 2024, the company's balance sheet shows total assets of $2.91 billion, an increase from $2.79 billion at the end of 2023, with cash and cash equivalents growing significantly to $189.2 million from $104.2 million, while total stockholders' equity increased to $1.31 billion Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | September 24, 2024 | December 26, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | 189,205 | 104,246 | | Total assets | 2,913,815 | 2,793,376 | | Total liabilities | 1,590,571 | 1,635,865 | | Total stockholders' equity | 1,308,290 | 1,141,662 | Condensed Consolidated Statements of Cash Flows For the 39 weeks ended September 24, 2024, net cash provided by operating activities was $516.1 million, a significant increase from $390.7 million in the prior year, with cash primarily used for capital expenditures of $246.5 million, dividends of $122.2 million, and share repurchases of $44.7 million, resulting in a net increase in cash of $85.0 million Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | 39 Weeks Ended Sep 24, 2024 | 39 Weeks Ended Sep 26, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | 516,089 | 390,739 | | Net cash used in investing activities | (237,216) | (273,519) | | Net cash used in financing activities | (193,914) | (221,757) | | Net increase (decrease) in cash | 84,959 | (104,537) | Supplemental and Non-GAAP Information This section provides supplemental data to enhance the understanding of the company's performance, including a reconciliation of the non-GAAP measure 'Restaurant Margin', detailed operational metrics by brand, and a summary of restaurant unit activity Reconciliation of Non-GAAP Measures The company uses restaurant margin, a non-GAAP measure, to evaluate core restaurant-level operating efficiency, which for Q3 2024 increased 24.1% to $202.1 million, or 16.0% of sales, up from 14.6% in the prior year, and for the 39-week period, it increased 26.7% to $673.1 million, or 17.2% of sales - Restaurant margin is a non-GAAP measure representing restaurant sales less restaurant-level operating costs (food, labor, rent, other operating), used to evaluate core restaurant-level operating efficiency[7] Reconciliation of Non-GAAP Measures (in thousands) | Metric (in thousands) | 13 Weeks Ended Sep 24, 2024 | 13 Weeks Ended Sep 26, 2023 | 39 Weeks Ended Sep 24, 2024 | 39 Weeks Ended Sep 26, 2023 | | :--- | :--- | :--- | :--- | :--- | | Income from operations | 102,023 | 73,859 | 377,967 | 270,216 | | Restaurant margin | 202,070 | 162,824 | 673,128 | 531,276 | | Restaurant margin % | 16.0% | 14.6% | 17.2% | 15.4% | Supplemental Financial and Operating Information Supplemental data for Q3 2024 shows improved cost efficiency, with food and beverage costs decreasing to 33.5% of sales from 34.6% and labor costs decreasing to 33.8% from 34.0%, while Texas Roadhouse branded restaurants saw comparable sales growth of 8.7%, and Bubba's 33 restaurants saw 5.3% growth Restaurant Operating Costs (% of sales) | Restaurant Operating Costs (% of sales) | Q3 2024 | Q3 2023 | Change (bps) | | :--- | :--- | :--- | :--- | | Food and beverage costs | 33.5% | 34.6% | 107 bps | | Labor | 33.8% | 34.0% | 18 bps | | Total | 84.0% | 85.4% | 137 bps | Q3 2024 Comparable Sales Growth | Q3 2024 Comparable Sales Growth | % Change | | :--- | :--- | | All Company Restaurants | 8.5% | | Texas Roadhouse Restaurants | 8.7% | | Bubba's 33 Restaurants | 5.3% | Restaurant Unit Activity As of September 24, 2024, the company had a total of 772 restaurants, a net increase of 50 units from the prior year, including 657 company-owned restaurants (a net increase of 34) and 115 franchise restaurants (a net increase of 16), with 10 new restaurants opened system-wide in Q3 Restaurant Count | Restaurant Count | As of Sep 24, 2024 | As of Sep 26, 2023 | Change | | :--- | :--- | :--- | :--- | | Total company restaurants | 657 | 623 | 34 | | Total franchise restaurants | 115 | 99 | 16 | | Total restaurants | 772 | 722 | 50 | - In Q3 2024, the company opened 7 company restaurants and 3 franchise restaurants, and year-to-date, 22 company and 9 franchise restaurants have been opened[19]