Texas Roadhouse Inc

Previous wording

Texas Roadhouse, Inc. is a growing restaurant company operating predominantly in the casual dining segment. Our late founder, W. Kent Taylor, started the Company in 1993 with the opening of the first Texas Roadhouse restaurant in Clarksville, Indiana. Since then, we have grown to three concepts with 753 restaurants in 49 states and ten foreign countries. As of March 26, 2024, our 753 restaurants included:

Current wording

Texas Roadhouse, Inc. is a growing restaurant company operating predominantly in the casual dining segment. Our late founder, W. Kent Taylor, started the Company in 1993 with the opening of the first Texas Roadhouse restaurant in Clarksville, Indiana. Since then, we have grown to three concepts with 762 restaurants in 49 states, one U.S. territory, and ten foreign countries. As of June 25, 2024, our 762 restaurants included:

Previous wording

We have contractual arrangements that grant us the right to acquire at pre-determined formulas the remaining equity interests in 18 of the 20 majority-owned company restaurants and 54 of the 59 domestic franchise restaurants.

Current wording

We have contractual arrangements that grant us the right to acquire at pre-determined formulas the remaining equity interests in 17 of the 19 majority-owned company restaurants and 54 of the 59 domestic franchise restaurants.

Previous wording

Throughout this report, the 13 weeks ended March 26, 2024 and March 28, 2023, are referred to as Q1 2024 and Q1 2023, respectively. Fiscal year 2024 will be 53 weeks in length, while the fourth quarter will be 14 weeks in length. Fiscal year 2023 was 52 weeks in length, while the quarters were 13 weeks in length.

Current wording

Throughout this report, the 13 weeks ended June 25, 2024 and June 27, 2023, are referred to as Q2 2024 and Q2 2023, respectively. The 26 weeks ended June 25, 2024, and June 27, 2023, are referred to as 2024 YTD and 2023 YTD, respectively. Fiscal year 2024 will be 53 weeks in length, with the fourth quarter 14 weeks in length. Fiscal year 2023 was 52 weeks in length, with the quarters 13 weeks in length.

Previous wording

expense related to market partners, software hosting fees, professional fees, group insurance, advertising expense, and the realized and unrealized holding gains and losses related to the investments in our deferred compensation plan.

Current wording

expense related to executive officers and Support Center employees, salary and share-based compensation expense related to market partners, software hosting fees, professional fees, group insurance, advertising expense, and the realized and unrealized holding gains and losses related to the investments in our deferred compensation plan.

Previous wording

Total revenue increased $146.9 million or 12.5% to $1,321.2 million in Q1 2024 compared to $1,174.4 million in Q1 2023 primarily due to an increase in comparable restaurant sales and store weeks. Comparable restaurant sales and store weeks increased 8.4% and 4.9%, respectively, at company restaurants in Q1 2024 compared to Q1 2023. The increase in comparable restaurant sales was due to an increase in guest traffic along with an increase in our per person average check. The increase in store weeks was due to new store openings.

Current wording

Total revenue increased $170.0 million or 14.5% to $1,341.2 million in Q2 2024 compared to $1,171.2 million in Q2 2023 primarily due to an increase in comparable restaurant sales and store weeks. Comparable restaurant sales and store weeks increased 9.3% and 5.6%, respectively, at company restaurants in Q2 2024 compared to Q2 2023. The increase in comparable restaurant sales was due to an increase in guest traffic along with an increase in our per person average check. The increase in store weeks was due to new store openings.

Previous wording

Net income increased $26.8 million or 31.0% to $113.2 million in Q1 2024 compared to $86.4 million in Q1 2023 primarily due to higher restaurant margin dollars, as described below, partially offset by higher general and administrative, pre-opening, and depreciation and amortization expenses. Diluted earnings per share increased 31.4% to $1.69 in Q1 2024 from $1.28 in Q1 2023 primarily due to the increase in net income.

Current wording

Net income increased $37.8 million or 46.0% to $120.1 million in Q2 2024 compared to $82.3 million in Q2 2023 primarily due to higher restaurant margin dollars, as described below, partially offset by higher general and administrative and depreciation and amortization expenses. Diluted earnings per share increased 46.4% to $1.79 in Q2 2024 from $1.22 in Q2 2023 primarily due to the increase in net income.

Previous wording

Restaurant margin dollars increased $42.8 million or 23.0% to $228.4 million in Q1 2024 compared to $185.7 million in Q1 2023 primarily due to higher sales. Restaurant margin, as a percentage of restaurant and other sales, increased to 17.4% in Q1 2024 compared to 15.9% in Q1 2023. The increase in restaurant margin, as a percentage of restaurant and other sales, was driven by higher sales partially offset by higher general liability insurance expense. The benefit of a higher average guest check and labor productivity more than offset wage and other labor inflation of 4.3% and commodity inflation of 0.9%.

Current wording

Restaurant margin dollars increased $59.8 million or 32.7% to $242.6 million in Q2 2024 compared to $182.8 million in Q2 2023 primarily due to higher sales. Restaurant margin, as a percentage of restaurant and other sales, increased to 18.2% in Q2 2024 compared to 15.7% in Q2 2023. The increase in restaurant margin, as a percentage of restaurant and other sales, was primarily driven by higher sales. The benefit of a higher average guest check and labor productivity more than offset wage and other labor inflation of 4.4% and commodity inflation of 0.4%.

Previous wording

In addition, we incurred $77.7 million of capital expenditures, paid dividends of $40.8 million, and repurchased $8.9 million of common stock.

Current wording

In addition, during the 13 weeks ended June 25, 2024, we incurred $77.8 million of capital expenditures, paid dividends of $40.7 million, and repurchased $26.2 million of common stock.

Previous wording

Restaurant and other sales increased 12.6% in Q1 2024 compared to Q1 2023. The following table summarizes certain key drivers and/or attributes of restaurant sales at company restaurants for the periods presented. Company restaurant count activity is shown in the restaurant unit activity table above.

Current wording

Restaurant and other sales increased 14.5% in Q2 2024 compared to Q2 2023 and 13.5% in 2024 YTD compared to 2023 YTD. The following table summarizes certain key drivers and/or attributes of restaurant sales at company restaurants for the periods presented. Company restaurant count activity is shown in the restaurant unit activity table above.

Previous wording

The increase in restaurant sales for Q1 2024 was primarily attributable to an increase in store weeks and an increase in comparable restaurant sales. The increase in store weeks was driven by the opening of new restaurants. The increase in comparable restaurant sales was driven by an increase in guest traffic counts along with an increase in our per person average check as shown in the table below.

Current wording

The increases in restaurant sales for Q2 2024 and 2024 YTD were primarily attributable to an increase in store weeks and an increase in comparable restaurant sales. The increases in store weeks were driven by the opening of new restaurants. The increases in comparable restaurant sales were driven by an increase in guest traffic counts along with an increase in our per person average check as shown in the table below.

Previous wording

Per person average check includes the benefit of menu price increases of approximately 2.2% and 2.7% implemented in Q2 2023 and Q4 2023, respectively. We implemented a menu price increase of 2.2% in early Q2 2024.

Current wording

Per person average check includes the benefit of a menu price increase of approximately 2.2% implemented in Q2 2024 and menu price increases of approximately 2.2% and 2.7% implemented in Q2 2023 and Q4 2023, respectively.

Previous wording

In Q1 2024, we opened nine Texas Roadhouse company restaurants. In 2024, we expect store week growth of approximately 8% across all concepts, including a benefit of 2% from the 53 rd week.

Current wording

In 2024 YTD, we opened 12 Texas Roadhouse company restaurants and three Bubba’s 33 company restaurants. In 2024, we expect store week growth of approximately 7.5% across all concepts, including a benefit of 2% from the 53 rd week.

Previous wording

Other sales include the net impact of the amortization of third party gift card fees and gift card breakage income, sales related to our non-royalty based retail products, and content revenue related to our tabletop kiosk devices. The net impact of these amounts was a reduction to other sales of $6.1 million in Q1 2024 and $5.1 million in Q1 2023.

Current wording

Other sales include the net impact of the amortization of third party gift card fees and gift card breakage income, sales related to our non-royalty based retail products, and content revenue related to our tabletop kiosk devices. The net impact of these amounts was a reduction to other sales of $3.1 million and $3.5 million in Q2 2024 and Q2 2023, respectively, and $9.2 million and $8.6 million in 2024 YTD and 2023 YTD, respectively.

Previous wording

Franchise royalties and fees increased by $0.3 million or 4.3% in Q1 2024 compared to Q1 2023. The increase was due to comparable restaurant sales growth and new store openings partially offset by a reclassification of $0.6 million related to certain items that were previously reported in general and administrative expense in our unaudited condensed consolidated statements of income.

Current wording

Franchise royalties and fees increased by $0.7 million or 10.9% in Q2 2024 compared to Q2 2023 and increased by $1.0 million or 7.6% in 2024 YTD compared with 2023 YTD. The increases were due to comparable restaurant sales growth and new store openings partially offset by $0.3 million in Q2 2024 and $0.9 million in 2024 YTD related to the reclassification of certain items that were reported in general and administrative expenses in our unaudited condensed consolidated statements of income in Q2 2023 and 2023 YTD.

Previous wording

In Q1 2024, our existing franchise partners opened two international Texas Roadhouse restaurants and one Jaggers domestic franchise restaurant.

Current wording

In 2024 YTD, our franchise partners opened five international Texas Roadhouse restaurants, including one in a U.S. territory, and one Jaggers domestic restaurant.

Previous wording

Food and beverage costs, as a percentage of restaurant and other sales, decreased to 33.9% in Q1 2024 compared to 35.2% in Q1 2023. The decrease in Q1 2024 was primarily driven by the benefit of a higher average guest check partially offset by commodity inflation of 0.9% primarily due to higher beef costs.

Current wording

Food and beverage costs, as a percentage of restaurant and other sales, decreased to 32.7% in Q2 2024 compared to 34.5% in Q2 2023 and decreased to 33.3% in 2024 YTD compared to 34.8% in 2023 YTD. The decreases were primarily driven by the benefit of a higher average guest check partially offset by commodity inflation of 0.4% in Q2 2024 and 0.7% in 2024 YTD primarily due to higher beef costs.

Previous wording

In total for 2024, we expect commodity inflation of approximately 3% for the year with prices locked for approximately 60% of our remaining forecasted costs and the remainder subject to floating market prices.

Current wording

In 2024, we expect commodity inflation of approximately 2% for the year with prices locked for approximately 40% of our remaining forecasted costs and the remainder subject to floating market prices.

Previous wording

Restaurant labor expenses, as a percentage of restaurant and other sales, decreased to 32.5% in Q1 2024 compared to 33.0% in Q1 2023. The decrease was primarily driven by the benefit of a higher average guest check and labor productivity partially offset by wage and other labor inflation of 4.3% in Q1 2024. Wage and other labor inflation was driven by higher wage and benefit expense due to labor market pressures along with increases in state-mandated minimum and tipped wage rates and increased investment in our people.

Current wording

Restaurant labor expenses, as a percentage of restaurant and other sales, decreased to 32.8% in Q2 2024 compared to 33.6% in Q2 2023 and decreased to 32.7% in 2024 YTD compared to 33.3% in 2023 YTD. The decreases were primarily driven by the benefit of a higher average guest check and labor productivity partially offset by wage and other labor inflation of 4.4% in both Q2 2024 and 2024 YTD. Wage and other labor inflation was driven by higher wage and benefit expense due to labor market pressures along with increases in state-mandated minimum and tipped wage rates and increased investment in our people.

Previous wording

Restaurant rent expense, as a percentage of restaurant and other sales, was 1.5% in Q1 2024 and Q1 2023. In Q1 2024, increase in average unit volume was offset by higher rent expense, as a percentage of restaurant and other sales, at our newer restaurants.

Current wording

Restaurant rent expense, as a percentage of restaurant and other sales, was 1.5% for all periods presented. In Q2 2024 and 2024 YTD, higher rent expense at our newer restaurants was offset by the increase in average unit volume.

Previous wording

Restaurant other operating expenses, as a percentage of restaurant and other sales, increased to 14.7% in Q1 2024 compared to 14.3% in Q1 2023. The increase was driven by an increase in general liability insurance expense of $4.4 million, as compared to the prior year period, and higher incentive compensation expense partially offset by an increase in average unit volume and lower supplies expense. The increase in general liability insurance expense was due to unfavorable claims experience and an increase in retention levels.

Current wording

Restaurant other operating expenses, as a percentage of restaurant and other sales, increased to 14.8% in Q2 2024 compared to 14.7% in Q2 2023 and increased to 14.7% in 2024 YTD compared to 14.5% in 2023 YTD. The increases were driven by an increase in general liability insurance expense of $0.5 million in Q2 2024 as compared to Q2 2023 and an increase of $4.9 million in 2024 YTD as compared to 2023 YTD as well as higher incentive compensation expense in both periods. These increases were partially offset by the increase in average unit volume and lower supplies expense. The increases in general liability insurance expense were due to unfavorable claims experience and an increase in retention levels.

Previous wording

Pre-opening expenses were $8.1 million in Q1 2024 compared to $5.4 million in Q1 2023 driven by an increase in the number and timing of new store openings. Pre-opening costs will fluctuate from quarter to quarter based on specific pre-opening costs incurred for each restaurant, the number and timing of restaurant openings, and the number and timing of restaurant managers hired.

Current wording

Pre-opening expenses were $6.2 million in Q2 2024 compared to $5.7 million in Q2 2023 and $14.3 million in 2024 YTD compared to $11.0 million in 2023 YTD. The increases were primarily driven by an increase in the number and timing of new store openings. Pre-opening costs will fluctuate from quarter to quarter based on specific pre-opening costs incurred for each restaurant, the number and timing of restaurant openings, and the number and timing of restaurant managers hired.

Previous wording

Depreciation and amortization expense, as a percentage of total revenue, was 3.1% in Q1 2024 and Q1 2023. In Q1 2024, the increase in average unit volume was offset by higher depreciation at our newer restaurants.

Current wording

Depreciation and amortization expense, as a percentage of total revenue, was 3.2% in both Q2 2024 and Q2 2023 and increased to 3.2% in 2024 YTD compared to 3.1% in 2023 YTD. In Q2 2024, higher depreciation expense at our newer restaurants was offset by the increase in average unit volume. The increase in 2024 YTD was driven by higher depreciation expense at our newer restaurants and was partially offset by the increase in average unit volume.

Previous wording

Impairment and closure costs, net was $0.2 million in Q1 2024 and was not significant in Q1 2023. In Q1 2024, impairment and closure costs, net included closure costs related to a planned restaurant relocation.

Current wording

Impairment and closure costs, net were $0.1 million in both Q2 2024 and Q2 2023 and were $0.3 million in 2024 YTD compared to $0.1 million in 2023 YTD. In Q2 2024 and 2024 YTD, impairment and closure costs, net included closure costs related to one restaurant relocation.

Previous wording

General and administrative expenses, as a percentage of total revenue, decreased to 4.0% in Q1 2024 compared to 4.2% in Q1 2023. The decrease was driven by an increase in average unit volume and a separation payout of $2.6 million in Q1 2023 related to the retirement of an executive officer partially offset by an increase in incentive compensation expense.

Current wording

General and administrative expenses, as a percentage of total revenue, decreased to 4.3% in Q2 2024 compared to 4.4% in Q2 2023 and decreased to 4.2% in 2024 YTD compared to 4.3% in 2023 YTD. The decreases were primarily driven by the increase in average unit volume and a favorable legal settlement received in Q2 2024 partially offset by higher incentive compensation expense.

Previous wording

Interest income, net was $1.4 million and $1.2 million in Q1 2024 and Q1 2023, respectively. The increase was driven by increased earnings on our cash and cash equivalents and decreased borrowings on our revolving credit facility.

Current wording

Interest income, net was $1.7 million and $1.0 million in Q2 2024 and Q2 2023, respectively, and was $3.1 million and $2.2 million in 2024 YTD and 2023 YTD, respectively. The increases were driven by increased earnings on our cash and cash equivalents and decreased borrowings on our revolving credit facility.

Previous wording

Equity income was $0.3 million in Q1 2024 compared to $0.8 million in Q1 2023. The decrease in Q1 2024 was primarily driven by a $0.6 million gain on the acquisition of four of these affiliates in Q1 2023.

Current wording

Equity income was $0.3 million in both Q2 2024 and Q2 2023 and was $0.5 million in 2024 YTD compared to $1.0 million in 2023 YTD. The decrease in 2024 YTD was primarily driven by a $0.6 million gain on the acquisition of four of these affiliates in 2023 YTD.

Previous wording

Our effective tax rate was 13.9% in Q1 2024 and Q1 2023. In Q1 2024, a decrease in the benefit of the FICA tip and work opportunity tax credits, which was driven by increased profitability, was offset by an increase in the excess tax benefits related to stock compensation. For 2024, we expect an effective tax rate of approximately 14% based on forecasted operating results.

Current wording

Our effective tax rate was 15.0% in Q2 2024 compared to 12.7% in Q2 2023 and was 14.5% in 2024 YTD compared to 13.3% in 2023 YTD. The increases were primarily due to a decrease in the impact of the FICA tip and work opportunity tax credits, which was driven by increased profitability. For 2024, we expect an effective tax rate of approximately 14.5% based on forecasted operating results.

Previous wording

Management uses restaurant margin as the primary measure for assessing performance of our segments. Restaurant margin (in dollars and as a percentage of restaurant and other sales) represents restaurant and other sales less restaurant-level operating costs, including food and beverage costs, labor, rent, and other operating costs. Restaurant margin also includes sales and operating costs related to our non-royalty based retail initiatives that is included in Other. Restaurant margin is used by our CODM to evaluate restaurant-level operating efficiency and performance. A reconciliation of income from operations to restaurant margin is included in the Results of Operations section above.

Current wording

Management uses restaurant margin as the primary measure for assessing performance of our segments. Restaurant margin (in dollars and as a percentage of restaurant and other sales) represents restaurant and other sales less restaurant-level operating costs, including food and beverage costs, labor, rent, and other operating costs. Restaurant margin also includes sales and operating costs related to our non-royalty based retail initiatives that are included in Other. Restaurant margin is used by our CODM to evaluate restaurant-level operating efficiency and performance. A reconciliation of income from operations to restaurant margin is included in the Results of Operations section above.

Previous wording

In our Texas Roadhouse reportable segment, restaurant margin dollars increased $38.2 million or 21.6% in Q1 2024. The increase was primarily due to higher sales partially offset by an increase in general liability expense and wage and other labor inflation.

Current wording

In our Texas Roadhouse reportable segment, restaurant margin dollars increased $56.4 million or 32.7% in Q2 2024 and increased $94.6 million or 27.1% in 2024 YTD. The increases were primarily due to higher sales partially offset by wage and other labor inflation as well as higher general liability insurance expense in the 2024 YTD period.

Previous wording

In our Bubba’s 33 reportable segment, restaurant margin dollars increased $3.7 million or 44.0% in Q1 2024. The increase was primarily due to higher sales and commodity deflation, driven by poultry, partially offset by wage and other labor inflation.

Current wording

In our Bubba’s 33 reportable segment, restaurant margin dollars increased $2.9 million or 30.4% in Q2 2024 and increased $6.6 million or 36.7% in 2024 YTD. The increases were primarily due to higher sales partially offset by wage and other labor inflation.

Previous wording

Net cash provided by operating activities was $243.4 million in Q1 2024 compared to $189.0 million in Q1 2023. This increase was primarily due to an increase in net income and a favorable change in working capital.

Current wording

Net cash provided by operating activities was $377.3 million in 2024 YTD compared to $288.2 million in 2023 YTD. This increase was primarily due to an increase in net income and a favorable change in working capital.

Previous wording

Net cash used in investing activities was $74.7 million in Q1 2024 compared to $103.3 million in Q1 2023. The decrease was primarily due to the acquisition of eight domestic franchise restaurants for $39.1 million in Q1 2023 partially offset by an increase in capital expenditures.

Current wording

Net cash used in investing activities was $146.2 million in 2024 YTD compared to $186.0 million in 2023 YTD. The decrease was primarily due to the acquisition of eight domestic franchise restaurants for $39.1 million in Q1 2023.

Previous wording

We require capital principally for the development of new company restaurants, the refurbishment or relocation of existing restaurants and the acquisition of franchise restaurants, as applicable. We either lease our restaurant site locations under operating leases for periods of five to 30 years (including renewal periods) or purchase the land when appropriate. As of March 26, 2024, we had developed 154 of the 644 company restaurants on land that we own.

Current wording

We require capital principally for the development of new company restaurants, the refurbishment or relocation of existing restaurants and the acquisition of franchise restaurants, as applicable. We either lease our restaurant site locations under operating leases for periods of five to 30 years (including renewal periods) or purchase the land when appropriate. As of June 25, 2024, we had developed 153 of the 650 company restaurants on land that we own.

Previous wording

Our future capital requirements will primarily depend on the number and mix of new restaurants we open, the timing of those openings, and the restaurant prototype developed in a given fiscal year. These requirements will include costs directly related to opening new restaurants or relocating existing restaurants and may also include costs necessary to ensure that our infrastructure is able to support a larger restaurant base.

Current wording

Our future capital requirements will primarily depend on the number and mix of new restaurants we open, the timing of those openings, and the restaurant prototype developed in a given fiscal year. These requirements will include costs directly related to opening, maintaining, or relocating restaurants and may also include costs necessary to ensure that our infrastructure is able to support a larger restaurant base.

Previous wording

We intend to satisfy our capital requirements over the next 12 months with cash on hand, net cash provided by operating activities and, if needed, funds available under our revolving credit facility. In 2024, we expect our capital expenditures to be approximately $340 million to $350 million.

Current wording

We intend to satisfy our capital requirements over the next 12 months with cash on hand, net cash provided by operating activities and, if needed, funds available under our revolving credit facility. In 2024, we expect capital expenditures of $360 million to $370 million.

Previous wording

Net cash used in financing activities was $59.6 million in Q1 2024 compared to $103.4 million in Q1 2023. The decrease is primarily due to the $50 million repayment of our revolving credit facility in Q1 2023 partially offset by an increase in our quarterly dividend payment.

Current wording

Net cash used in financing activities was $138.0 million in 2024 YTD compared to $168.8 million in 2023 YTD. The decrease is primarily due to the $50 million repayment of our revolving credit facility in 2023 YTD partially offset by an increase in our quarterly dividend payment.

Previous wording

On February 14, 2024, our Board authorized the payment of a quarterly cash dividend of $0.61 per share of common stock compared to the quarterly dividend of $0.55 per share of common stock declared in 2023. The payment of quarterly dividends totaled $40.8 million and $36.9 million in Q1 2024 and Q1 2023, respectively.

Current wording

On February 14, 2024, our Board authorized the payment of a quarterly cash dividend of $0.61 per share of common stock compared to the quarterly dividend of $0.55 per share of common stock declared in 2023. The payment of quarterly dividends totaled $81.5 million and $73.7 million in 2024 YTD and 2023 YTD, respectively.

Previous wording

In Q1 2024, we paid $8.9 million to repurchase 60,262 shares of our common stock. In Q1 2023, we paid $9.6 million for 92,751 shares of our common stock. As of March 26, 2024, $107.9 million remained under our authorized stock repurchase program.

Current wording

During 2024 YTD and 2023 YTD, we paid $35.1 million and $33.1 million, respectively, to repurchase 222,666 shares and 306,726 shares, respectively, of our common stock. As of June 25, 2024, $81.7 million remained under our authorized stock repurchase program.

Previous wording

We maintain a credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A. and PNC Bank, N.A. The credit facility is an unsecured, revolving credit agreement and has a borrowing capacity of up to $300.0 million with the option to increase by an additional $200.0 million subject to certain limitations, including approval by the syndicate of lenders. The credit facility has a maturity date of May 1, 2026.

Current wording

We maintain a credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A. and PNC Bank, N.A. The credit facility is an unsecured, revolving credit agreement and has a borrowing capacity of up to $300.0 million with the option to increase by an additional $200.0 million subject to certain limitations, including approval by the syndicate of commercial lenders. The credit facility has a maturity date of May 1, 2026.

Previous wording

The interest rate for the credit facility as of March 26, 2024 and March 28, 2023 was 6.20% and 5.47%, respectively.

Current wording

The interest rate for the credit facility as of June 25, 2024 and June 27, 2023 was 6.21% and 6.07%, respectively.