The Cheesecake Factory(CAKE) - 2024 Q4 - Annual Results

Executive Summary The company reported a strong Q4 fiscal 2023, achieving record annual revenue and solid earnings growth driven by comparable sales and operational improvements Q4 2023 Financial Highlights The company reported strong Q4 fiscal 2023 results with $877.0 million in revenues, 7.7% growth excluding an extra week, and adjusted EPS of $0.80 Q4 Fiscal 2023 Financial Performance | Metric | Q4 Fiscal 2023 (13 Weeks) | Q4 Fiscal 2022 (14 Weeks) | | :-------------------------------------- | :------------------------ | :------------------------ | | Total Revenues | $877.0 million | $892.8 million | | Net Income (GAAP) | $12.7 million | | | Diluted Net Income per Share (GAAP) | $0.26 | | | Pre-tax Net Expense (Adjustments) | $35.6 million | | | Adjusted Net Income (Non-GAAP) | $39.0 million | | | Adjusted Diluted Net Income per Share (Non-GAAP) | $0.80 | | - Excluding the impact of an additional week in fiscal 2022 (approximately $78.4 million in sales), total revenues for Q4 fiscal 2023 increased 7.7% over the prior year period[1] - Comparable restaurant sales at The Cheesecake Factory restaurants increased 2.5% year-over-year in Q4 fiscal 2023 and increased 14.0% relative to Q4 fiscal 2019, on an operating week basis[2] CEO Commentary CEO David Overton highlighted strong Q4 performance, record annual revenue, and market outperformance driven by operational execution and unit growth - Q4 results marked a strong finish to the year, with positive comparable sales growth and margin expansion contributing to record annual revenue and solid earnings growth[3] - Comparable sales and traffic at The Cheesecake Factory restaurants outperformed the broader casual dining industry in Q4, demonstrating brand strength and market share capture[3] - Operational execution improvements were seen in labor productivity, food efficiency, wage management, and hourly staff and manager retention, driving profitability[3] - Nine new restaurants opened during the quarter, along with two international Cheesecake Factory locations under licensing agreements, including the first in Thailand[3] Operational Highlights The company significantly expanded its restaurant footprint and detailed its diverse brand portfolio and operational excellence Restaurant Development The company expanded its footprint in Q4 fiscal 2023 with nine new company-owned and two international licensed restaurant openings - During Q4 fiscal 2023, the Company opened nine new restaurants: 3 Cheesecake Factory, 3 North Italia, and 3 FRC restaurants[4] - Two Cheesecake Factory restaurants opened internationally under licensing agreements in China and Thailand during Q4 fiscal 2023[4] - Subsequent to quarter-end, one North Italia, one Flower Child, one Culinary Dropout, and one international Cheesecake Factory (Mexico) opened[4] Company Overview The Cheesecake Factory operates 334 restaurants across multiple brands in the US and Canada, with 33 international licensed locations and a bakery division - The Company owns and operates 334 restaurants in the U.S. and Canada under brands including The Cheesecake Factory, North Italia, Flower Child, and FRC brands[7] - 33 The Cheesecake Factory restaurants operate internationally under licensing agreements[7] - The bakery division produces cheesecakes and other baked products for restaurants, international licensees, and third-party customers[7] - Named to the FORTUNE Magazine '100 Best Companies to Work For' list for the tenth consecutive year in 2023[7] Liquidity and Capital Allocation The company maintained strong liquidity and managed debt, while actively returning capital to shareholders through repurchases and dividends Current Liquidity and Debt As of January 2, 2024, the company had $292.8 million in liquidity and $475 million in total principal debt outstanding Liquidity and Debt Position | Metric | As of January 2, 2024 | | :-------------------------------------- | :-------------------- | | Total Available Liquidity | $292.8 million | | Cash Balance | $56.3 million | | Revolving Credit Facility Availability | $236.5 million | | Total Principal Amount of Debt Outstanding | $475 million | | 0.375% Convertible Senior Notes due 2026 | $345 million | | Revolving Credit Facility Drawn | $130 million | Share Repurchases and Dividends In Q4 fiscal 2023, the company repurchased $9.8 million in shares and declared a quarterly dividend of $0.27 per share - Repurchased approximately 318,400 shares of stock at a cost of $9.8 million in Q4 fiscal 2023[5] - Declared a quarterly dividend of $0.27 per share, payable on March 19, 2024[5] Conference Call Information A conference call for Q4 fiscal 2023 results was held on February 21, 2024, with a webcast replay available until March 22, 2024 - Conference call to review Q4 fiscal 2023 results held on February 21, 2024, at 2:00 p.m. Pacific Time[6] - Webcast available live on investors.thecheesecakefactory.com, with a replay available through March 22, 2024[6] Safe Harbor Statement The safe harbor statement cautions investors on forward-looking statements, highlighting risks from economic conditions, supply chain, and regulatory changes - The press release contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially[9] - Factors affecting results include economic, public health, and political conditions, supply chain disruptions, and changes in laws[9] - Investors are cautioned not to place undue reliance on forward-looking statements and are referred to SEC filings for detailed risk factors[9] Condensed Consolidated Financial Statements This section presents the company's consolidated income statements, segment performance, operating metrics, and key balance sheet information Consolidated Statements of Income/(Loss) This statement details revenues, costs, and profitability for Q4 and full fiscal year 2023, including operating expenses and net income Consolidated Income Statement Highlights | Metric | 13 Weeks Ended Jan 2, 2024 | % of Revenues | 14 Weeks Ended Jan 3, 2023 | % of Revenues | 52 Weeks Ended Jan 2, 2024 | % of Revenues | 53 Weeks Ended Jan 3, 2023 | % of Revenues | | :-------------------------------------- | :------------------------- | :------------ | :------------------------- | :------------ | :------------------------- | :------------ | :------------------------- | :------------ | | Revenues | $877,009 | 100.0% | $892,802 | 100.0% | $3,439,503 | 100.0% | $3,303,156 | 100.0% | | Food and beverage cost | $201,449 | 23.0% | $220,469 | 24.7% | $803,500 | 23.4% | $810,926 | 24.6% | | Labor expenses | $308,555 | 35.2% | $318,629 | 35.7% | $1,227,895 | 35.7% | $1,211,951 | 36.7% | | Income/(loss) from operations | $8,139 | 0.9% | $(15,123) | (1.7)% | $108,566 | 3.2% | $38,935 | 1.2% | | Net income/(loss) | $12,681 | 1.4% | $(3,298) | (0.4)% | $101,351 | 2.9% | $43,123 | 1.3% | | Diluted net income/(loss) per share | $0.26 | | $(0.07) | | $2.07 | | $0.86 | | Selected Segment Information This section breaks down revenues, operating income, and other costs across The Cheesecake Factory, North Italia, Other FRC, and Other segments Segment Revenues and Operating Income | Segment | Q4 FY23 Revenues | Q4 FY22 Revenues | FY23 Revenues | FY22 Revenues | | :------------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | The Cheesecake Factory restaurants | $658,445 | $674,467 | $2,595,066 | $2,528,043 | | North Italia | $67,224 | $65,514 | $258,878 | $228,622 | | Other FRC | $70,913 | $66,507 | $263,923 | $237,552 | | Other | $80,427 | $86,314 | $321,636 | $308,939 | | Total | $877,009 | $892,802 | $3,439,503 | $3,303,156 | | Segment | Q4 FY23 Op. Income | Q4 FY22 Op. Income | FY23 Op. Income | FY22 Op. Income | | :------------------------------------- | :----------------- | :----------------- | :-------------- | :-------------- | | The Cheesecake Factory restaurants | $65,363 | $50,872 | $297,063 | $220,765 | | North Italia | $3,201 | $3,553 | $18,515 | $13,934 | | Other FRC | $3,596 | $5,346 | $19,422 | $23,577 | | Other | $(64,021) | $(74,894) | $(226,434) | $(219,341) | | Total | $8,139 | $(15,123) | $108,566 | $38,935 | Operating Information by Segment This section details segment-specific operating metrics, including comparable sales growth, restaurant counts, and operating weeks Segment Operating Metrics | Metric | Q4 FY23 | Q4 FY22 | FY23 | FY22 | | :-------------------------------------- | :------ | :------ | :---- | :---- | | The Cheesecake Factory restaurants: | | | | | | Comparable restaurant sales vs. prior year | 2.5% | 4.0% | 3.0% | 7.0% | | Restaurants open at period-end | 216 | 211 | 216 | 211 | | North Italia: | | | | | | Comparable restaurant sales vs. prior year | 7% | 9% | 8% | 15% | | Restaurants open at period-end | 36 | 33 | 36 | 33 | | Other Fox Restaurant Concepts (FRC): | | | | | | Restaurants open at period-end | 40 | 34 | 40 | 34 | | Total Company-Owned Restaurants: | | | | | | The Cheesecake Factory | 216 | | | | | North Italia | 36 | | | | | Other FRC | 40 | | | | | Other | 39 | | | | | Total Company-Owned | 331 | | | | | Total International-Licensed | 32 | | | | Selected Consolidated Balance Sheet Information This section presents key balance sheet figures, including cash and long-term debt, as of January 2, 2024, and January 3, 2023 Key Balance Sheet Figures | Metric | January 2, 2024 | January 3, 2023 | | :-------------------------------------- | :-------------- | :-------------- | | Cash and cash equivalents | $56,290 | $114,777 | | Long-term debt, net of issuance costs | $470,047 | $468,032 | - Long-term debt includes $340.0 million net balance of 0.375% convertible senior notes due 2026 (principal amount of $345 million) and $130 million drawn on the Company's revolving credit facility[15] Reconciliation of Non-GAAP Results to GAAP Results This section explains and reconciles non-GAAP financial measures to their GAAP equivalents, providing a clearer view of core operational performance Explanation of Non-GAAP Measures Non-GAAP measures supplement GAAP results by excluding non-recurring items, aiding internal decision-making and period-to-period comparisons - Non-GAAP measurements supplement GAAP results by excluding the impact of certain items not considered indicative of ongoing operations[17] - These measures are used for financial and operational decision-making and to evaluate period-to-period comparisons[17] Reconciliation of Non-GAAP Financial Measures This table reconciles GAAP net income and diluted EPS to adjusted non-GAAP figures, detailing adjustments for impairment, lease termination, and acquisition costs Non-GAAP Reconciliation Table | Metric | Q4 FY23 (13 Weeks) | Q4 FY22 (14 Weeks) | FY23 (52 Weeks) | FY22 (53 Weeks) | | :-------------------------------------- | :----------------- | :----------------- | :-------------- | :-------------- | | Net income/(loss) (GAAP) | $12,681 | $(3,298) | $101,351 | $43,123 | | Impairment of assets and lease termination expenses | $27,827 | $31,074 | $29,464 | $31,387 | | Acquisition-related contingent consideration, compensation and amortization expenses | $7,796 | $10,448 | $11,686 | $13,368 | | Tax effect of adjustments | $(9,262) | $(10,795) | $(10,699) | $(11,637) | | Adjusted net income (non-GAAP) | $39,042 | $27,429 | $131,802 | $76,241 | | Diluted net income/(loss) per share (GAAP) | $0.26 | $(0.07) | $2.07 | $0.86 | | Impairment of assets and lease termination expenses | $0.57 | $0.63 | $0.61 | $0.62 | | Acquisition-related contingent consideration, compensation and amortization expenses | $0.16 | $0.21 | $0.24 | $0.27 | | Tax effect of adjustments | $(0.19) | $(0.22) | $(0.22) | $(0.23) | | Adjusted net income per share (non-GAAP) | $0.80 | $0.56 | $2.69 | $1.51 |