The Cheesecake Factory(CAKE) - 2026 Q1 - Quarterly Report

Part I - Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Financial Statements This section presents the unaudited condensed consolidated financial statements for The Cheesecake Factory, including balance sheets, income statements, and cash flows, with explanatory notes Condensed Consolidated Balance Sheets This section provides a summary of the company's assets, liabilities, and equity as of April 1, 2025, compared to December 31, 2024 | Account | April 1, 2025 (in thousands $) | December 31, 2024 (in thousands $) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $135,411 | $84,176 | | Total current assets | $361,053 | $333,313 | | Total assets | $3,110,864 | $3,041,760 | | Liabilities & Equity | | | | Total current liabilities | $683,943 | $711,420 | | Long-term debt | $627,306 | $452,062 | | Total liabilities | $2,771,459 | $2,598,305 | | Total stockholders' equity | $339,405 | $443,455 | Condensed Consolidated Statements of Income This section details the company's revenues, operating income, and net income for the thirteen weeks ended April 1, 2025, compared to the prior year | Metric | April 1, 2025 (in thousands $) | April 2, 2024 (in thousands $) | | :--- | :--- | :--- | | Revenues | $927,197 | $891,223 | | Income from operations | $51,959 | $39,293 | | Loss on extinguishment of debt | ($15,891) | $0 | | Net income | $32,941 | $33,191 | | Diluted EPS | $0.67 | $0.68 | Condensed Consolidated Statements of Cash Flows This section outlines the company's cash flows from operating, investing, and financing activities for the thirteen weeks ended April 1, 2025 | Activity | April 1, 2025 (in thousands $) | April 2, 2024 (in thousands $) | | :--- | :--- | :--- | | Cash provided by operating activities | $78,919 | $66,748 | | Cash used in investing activities | ($43,353) | ($37,356) | | Cash provided by / (used in) financing activities | $15,663 | ($25,319) | | Net change in cash and cash equivalents | $51,235 | $3,930 | - Significant financing activities in Q1 2025 included proceeds from new long-term convertible debt of $575.0 million, repayment of existing convertible debt of $289.8 million, and treasury stock purchases of $141.4 million[17] Notes to Condensed Consolidated Financial Statements Detailed notes disclose accounting policies, debt instruments, segment performance, and shareholder equity, including new convertible notes, debt extinguishment, and share repurchases - In February 2025, the company issued $575.0 million of 2.00% Convertible Senior Notes due 2030, with net proceeds of approximately $558.5 million[39] - Proceeds from the 2030 Notes were used to repurchase approximately $276.0 million of the 2026 Notes for $289.8 million, resulting in a $15.9 million loss on debt extinguishment in Q1 2025[48][106] - During Q1 2025, the company repurchased 2.6 million shares of common stock for $141.4 million; cumulatively, 59.7 million shares have been repurchased under the 61.0 million share authorization[61] Segment Revenue (Thirteen Weeks Ended April 1, 2025 vs April 2, 2024) | Segment | Q1 2025 Revenue (in thousands $) | Q1 2024 Revenue (in thousands $) | % Change | | :--- | :--- | :--- | :--- | | The Cheesecake Factory Restaurants | $672,734 | $667,794 | +0.7% | | North Italia | $83,410 | $70,874 | +17.7% | | Other FRC | $87,424 | $74,229 | +17.8% | | Other | $83,629 | $78,326 | +6.8% | | Total | $927,197 | $891,223 | +4.0% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2025 financial results, focusing on revenue growth, comparable sales, cost fluctuations, and capital allocation, including debt refinancing and share repurchases Results of Operations Total revenues rose 4.0% to $927.2 million, driven by comparable sales growth at The Cheesecake Factory, while cost of sales and labor expenses improved as a percentage of revenue - The Cheesecake Factory comparable sales increased 1.0%, driven by a 2.2% average check increase (4.4% pricing, -2.2% mix), offset by a 1.2% traffic decrease; off-premise sales were stable at 22% of restaurant sales[94] - North Italia comparable sales decreased approximately 1%, while Flower Child comparable sales increased approximately 5%[95][96] - Food and beverage costs decreased to 21.8% of revenues from 22.8% YoY, primarily due to favorable commodity inflation[99] - Labor expenses as a percentage of revenue decreased to 35.7% from 36.0% YoY, as menu price increases outpaced wage inflation[100] Non-GAAP Adjusted Net Income Reconciliation (Thirteen Weeks Ended) | Metric | April 1, 2025 (in thousands $) | April 2, 2024 (in thousands $) | | :--- | :--- | :--- | | Net Income (GAAP) | $32,941 | $33,191 | | Loss on extinguishment of debt | $15,891 | — | | Other adjustments | $1,376 | $3,204 | | Tax effect of adjustments | ($4,489) | ($833) | | Adjusted Net Income (Non-GAAP) | $45,719 | $35,562 | | Adjusted Diluted EPS (Non-GAAP) | $0.93 | $0.73 | Liquidity and Capital Resources Cash increased to $135.4 million, driven by operating cash flow and financing activities, including new convertible notes, debt repayment, capital expenditures for new restaurants, and shareholder returns - Cash provided by operating activities increased to $78.9 million in Q1 2025 from $66.7 million in Q1 2024[115][116] - The company plans for $190 to $210 million in capital expenditures for fiscal 2025 to support the opening of as many as 25 new restaurants[118] - In Q1 2025, the company repaid the entire $110.0 million outstanding balance on its Revolver Facility; as of April 1, 2025, net availability was $366.5 million[119] - In Q1 2025, the company paid $12.5 million in dividends and repurchased 2.6 million shares for $141.4 million[115][124][125] Quantitative and Qualitative Disclosures About Market Risk The company identifies market risks including commodity price volatility, interest rate changes, and investment value fluctuations, with a hypothetical 1% food cost increase impacting cost of sales by $2.0 million - A hypothetical 1% increase in food costs would have negatively impacted cost of sales by $2.0 million in Q1 2025[134] - As of April 1, 2025, the company had no outstanding borrowings under its variable-rate Loan Agreement, thus having no immediate exposure to interest rate fluctuations on that facility[135] - The company is exposed to market risk from investments in variable life insurance contracts supporting its non-qualified plans; a hypothetical 10% decline in the market value of these assets would reduce net income by $2.8 million due to the tax impact[135] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of April 1, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of April 1, 2025[136] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[137] Part II - Other Information This section provides additional information, including updated risk factors related to increased indebtedness and details on share repurchase activities Risk Factors This section supplements existing risk factors, focusing on new risks from increased indebtedness, including lack of debt covenants, potential inability to fund note repurchases, and stock price depression from hedging or dilution - The indentures for the 2026 and 2030 Notes do not restrict the company from incurring additional debt, which could increase financial vulnerability and limit cash flow for operations[140][141] - The company may not have sufficient funds to repurchase the notes for cash following a 'fundamental change' (e.g., a change of control), which could trigger a default[148] - Hedging activities by note investors (e.g., short selling the company's stock) and the potential for share issuance upon note conversion could depress the trading price of the common stock[144][146] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, the company repurchased 2.6 million shares for $141.4 million, with 1.3 million shares remaining available under authorization Share Repurchases in Q1 2025 | Metric | Value | | :--- | :--- | | Total Shares Purchased (in shares) | 2,606,000 | | Average Price Paid per Share ($) | ~$54.26 | | Total Cost (in thousands $) | $141,400 (excluding excise tax) | | Shares Remaining in Authorization (in shares) | 1,335,000 |