BJs RESTAURANTS INC [BJRI] Filings

10-Q 1 bjri-20241001.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended October 1, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ______

Commission file number 0-21423

BJ’S RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)

    California

    33-0485615

    (State or other jurisdiction of
incorporation or organization)

    (I.R.S. Employer
Identification Number)

7755 Center Avenue, Suite 300

Huntington Beach, California 92647

(714) 500-2400

Securities registered pursuant to Section 12(b) of the Act:

    Title of Each Class

    Trading
Symbol

    Name of each exchange on which registered

    Common Stock, No Par Value

    BJRI

    NASDAQ Global Select Market

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


☑	Large accelerated filer	☐	Accelerated filer
☐	Non-accelerated filer	☐	Smaller reporting company
☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of November 1, 2024, there were 22,816,526 shares of Common Stock of the Registrant outstanding.

BJ’S RESTAURANTS, INC.

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements	1

	Consolidated Balance Sheets – October 1, 2024 (Unaudited) and January 2, 2024	1

	Unaudited Consolidated Statements of Operations – Thirteen and Thirty-Nine Weeks Ended October 1, 2024 and October 3, 2023	2
	Unaudited Consolidated Statements of Shareholders’ Equity – Thirteen and Thirty-Nine Weeks Ended October 1, 2024 and October 3, 2023	3
	Unaudited Consolidated Statements of Cash Flows – Thirteen and Thirty-Nine Weeks Ended October 1, 2024 and October 3, 2023	4

	Notes to Unaudited Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18

Item 4.	Controls and Procedures	18

Item 5.	Other Information	18

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	19

Item 1A.	Risk Factors	19

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 6.	Exhibits	20


	SIGNATURES	21

PART I. FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

BJ’S RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)


	October 1, 2024		January 2, 2024
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	18,422	$	29,070
Accounts and other receivables, net		17,503		19,469
Inventories, net		12,938		13,245
Prepaid expenses and other current assets		15,605		21,237
Total current assets		64,468		83,021

Property and equipment, net		528,125		525,190
Operating lease assets		341,332		350,091
Goodwill		4,673		4,673
Equity method investment		4,389		4,770
Deferred income taxes, net		55,105		50,147
Other assets, net		43,692		40,562
Total assets	$	1,041,784	$	1,058,454

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	47,658	$	60,641
Accrued expenses		102,626		101,295
Current operating lease obligations		32,856		37,389
Total current liabilities		183,140		199,325

Long-term operating lease obligations		401,696		414,114
Long-term debt		66,500		68,000
Other liabilities		14,273		11,254
Total liabilities		665,609		692,693

Commitments and contingencies

Shareholders’ equity:
Preferred stock, 5,000 shares authorized, none issued or outstanding		—		—
Common stock, no par value, 125,000 shares authorized and 22,896 and 23,184 shares issued and outstanding as of October 1, 2024 and January 2, 2024, respectively		—		—
Capital surplus		71,652		77,036
Retained earnings		304,523		288,725
Total shareholders’ equity		376,175		365,761
Total liabilities and shareholders’ equity	$	1,041,784	$	1,058,454

See accompanying notes to unaudited consolidated financial statements.

BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
	October 1, 2024			October 3, 2023			October 1, 2024			October 3, 2023
Revenues	$	325,702		$	318,644		$	1,012,963		$	1,009,594
Restaurant operating costs (excluding depreciation and amortization):
Cost of sales		86,673			82,652			261,462			264,143
Labor and benefits		120,718			118,198			372,048			373,053
Occupancy and operating		80,322			80,020			236,746			241,078
General and administrative		20,960			19,473			64,561			60,373
Depreciation and amortization		18,193			17,879			54,229			53,199
Restaurant opening		1,115			1,379			2,005			2,601
Loss on disposal and impairment of assets, net		329			1,430			3,041			4,706
Total costs and expenses		328,310			321,031			994,092			999,153
(Loss) income from operations		(2,608	)		(2,387	)		18,871			10,441

Other (expense) income:
Interest expense, net		(1,342	)		(1,013	)		(4,012	)		(3,242	)
Other income (expense), net (1)		763			(3	)		4,231			815
Total other (expense) income		(579	)		(1,016	)		219			(2,427	)
(Loss) income before income taxes		(3,187	)		(3,403	)		19,090			8,014

Income tax (benefit) expense		(260	)		401			(2,863	)		(3,595	)
Net (loss) income	$	(2,927	)	$	(3,804	)	$	21,953		$	11,609

Net (loss) income per share:
Basic	$	(0.13	)	$	(0.16	)	$	0.94		$	0.49
Diluted	$	(0.13	)	$	(0.16	)	$	0.92		$	0.48

Weighted average number of shares outstanding:
Basic		23,111			23,542			23,246			23,521
Diluted		23,111			23,542			23,864			23,986

(1)

For the thirteen weeks ended October 1, 2024 and October 3, 2023, related party costs included in other income, net was an equity method investment loss of $88,000 and $29,000, respectively. For the thirty-nine weeks ended October 1, 2024 and October 3, 2023, related party costs included in other income, net was an equity method investment loss of $381,000 and $129,000, respectively See Note 10 for further information.

See accompanying notes to unaudited consolidated financial statements.

BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)


	For the Thirteen Weeks Ended
	Common Stock						Capital			Retained
	Shares			Amount			Surplus			Earnings			Total
Balance, July 4, 2023		23,544		$	—		$	73,407		$	292,639		$	366,046
Exercise of stock options		8			246			19			—			265
Issuance of restricted stock units		21			804			(806	)		—			(2	)
Repurchase, retirement and reclassification of common stock		(164	)		(1,050	)		—			(3,250	)		(4,300	)
Stock-based compensation		—			—			2,765			—			2,765
Net loss		—			—			—			(3,804	)		(3,804	)
Balance, October 3, 2023		23,409		$	—		$	75,385		$	285,585		$	360,970

Balance, July 2, 2024		23,138		$	—		$	72,037		$	314,452		$	386,489
Issuance of restricted stock units		27			1,246			(1,390	)		—			(144	)
Repurchase, retirement and reclassification of common stock		(269	)		(1,246	)		—			(7,002	)		(8,248	)
Stock-based compensation		—			—			1,005			—			1,005
Adjustment to dividends previously accrued		—			—			—			—			—
Net loss		—			—			—			(2,927	)		(2,927	)
Balance, October 1, 2024		22,896		$	—		$	71,652		$	304,523		$	376,175

	For the Thirty-Nine Weeks Ended
	Common Stock						Capital			Retained
	Shares			Amount			Surplus			Earnings			Total
Balance, January 3, 2023		23,392		$	—		$	74,459		$	271,056		$	345,515
Exercise of stock options		8			254			17			—			271
Issuance of restricted stock units		173			6,965			(7,465	)		—			(500	)
Repurchase, retirement and reclassification of common stock		(164	)		(7,219	)		—			2,919			(4,300	)
Stock-based compensation		—			—			8,374			—			8,374
Adjustment to dividends previously accrued		—			—			—			1			1
Net income		—			—			—			11,609			11,609
Balance, October 3, 2023		23,409		$	—		$	75,385		$	285,585		$	360,970

Balance, January 2, 2024		23,184		$	—		$	77,036		$	288,725		$	365,761
Exercise of stock options		5			251			(83	)		—			168
Issuance of restricted stock units		230			10,676			(11,712	)		—			(1,036	)
Repurchase, retirement and reclassification of common stock		(523	)		(10,927	)		—			(6,156	)		(17,083	)
Stock-based compensation		—			—			6,411			—			6,411
Adjustment to dividends previously accrued		—			—			—			1			1
Net income		—			—			—			21,953			21,953
Balance, October 1, 2024		22,896		$	—		$	71,652		$	304,523		$	376,175

See accompanying notes to unaudited consolidated financial statements.

BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	For the Thirty-Nine Weeks Ended
	October 1, 2024			October 3, 2023
Cash flows from operating activities:
Net income	$	21,953		$	11,609
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		54,229			53,199
Non-cash lease expense		23,899			24,753
Amortization of financing costs		163			163
Deferred income taxes		(4,958	)		(3,998	)
Stock-based compensation expense		6,156			8,089
Loss on disposal and impairment of assets, net		3,041			4,706
Equity method investment		381			129
Changes in assets and liabilities:
Accounts and other receivables		2,816			12,658
Inventories, net		801			(2,097	)
Prepaid expenses and other current assets		3,512			(152	)
Other assets, net		(4,189	)		(2,091	)
Accounts payable		(9,383	)		(4,619	)
Accrued expenses		1,343			4,344
Operating lease obligations		(32,941	)		(33,099	)
Other liabilities		3,019			17
Net cash provided by operating activities		69,842			73,611

Cash flows from investing activities:
Purchases of property and equipment		(61,028	)		(81,968	)
Proceeds from sale of assets		—			4
Net cash used in investing activities		(61,028	)		(81,964	)

Cash flows from financing activities:
Borrowings on line of credit		646,100			534,000
Payments on line of credit		(647,600	)		(534,000	)
Taxes paid on vested stock units under employee plans		(1,036	)		(500	)
Proceeds from exercise of stock options		168			271
Cash dividends accrued under stock compensation plans		(11	)		(26	)
Repurchase of common stock		(17,083	)		(4,300	)
Net cash used in financing activities		(19,462	)		(4,555	)

Net decrease in cash and cash equivalents		(10,648	)		(12,908	)
Cash and cash equivalents, beginning of period		29,070			24,873
Cash and cash equivalents, end of period	$	18,422		$	11,965

See accompanying notes to unaudited consolidated financial statements.

BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	For the Thirty-Nine Weeks Ended
	October 1, 2024		October 3, 2023
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	4,723	$	406
Cash paid for interest, net of capitalized interest	$	3,420	$	2,538
Cash paid for operating lease obligations	$	46,826	$	47,609
Supplemental disclosure of non-cash investing and financing activities:
Operating lease assets obtained in exchange for operating lease obligations	$	15,990	$	14,730
Property and equipment acquired and included in accounts payable	$	6,314	$	9,301
Stock-based compensation capitalized	$	255	$	285

See accompanying notes to unaudited consolidated financial statements.

BJ’S RESTAURANTS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the accounts of BJ’s Restaurants, Inc. (referred to herein as the “Company,” “we,” “us” and “our”) and our wholly owned subsidiaries. The consolidated financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of our financial condition, results of operations, shareholders’ equity and cash flows for the periods presented. Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and footnote disclosures normally included in consolidated financial statements in accordance with U.S. GAAP have been omitted pursuant to the U.S. Securities and Exchange Commission (“SEC”) rules.

The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates. Our operating results for the thirty-nine weeks ended October 1, 2024 may not be indicative of operating results for the entire year.

A description of our accounting policies and other financial information is included in our audited consolidated financial statements filed with the SEC on Form 10-K for the fiscal year ended January 2, 2024. The disclosures included in our accompanying interim consolidated financial statements and footnotes should be read in conjunction with our consolidated financial statements and notes thereto included in the Annual Report on Form 10-K and our other reports filed from time to time with the Securities and Exchange Commission.

2. REVENUE RECOGNITION

Our revenues are comprised of food and beverage sales from our restaurants, including takeout, delivery and catering sales. Revenues from restaurant sales are recognized when payment is tendered. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected from the credit card processor. We sell gift cards which do not have an expiration date, and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and will be recognized as gift card “breakage.” Estimated gift card breakage is recorded as revenue and recognized in proportion to our historical redemption pattern, unless there is a legal obligation to remit the unredeemed gift cards to government authorities.

Our “BJ’s Premier Rewards Plus” guest loyalty program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered on a relative standalone selling price basis, and defer the revenues allocated to the points, less expected expirations, until such points are redeemed.

The liability related to our gift card and loyalty program, included in “Accrued expenses” on our Consolidated Balance Sheets is as follows (in thousands):


	October 1, 2024		January 2, 2024
Gift card liability	$	9,793	$	14,380
Deferred loyalty revenue	$	2,735	$	2,510

Revenue recognized for the redemption of gift cards and loyalty rewards deferred at the beginning of each respective fiscal year is as follows (in thousands):


	For the Thirteen Weeks Ended				For the Thirty-Nine Weeks Ended
	October 1, 2024		October 3, 2023		October 1, 2024		October 3, 2023
Revenue recognized from gift card liability	$	1,405	$	1,493	$	9,308	$	9,923
Revenue recognized from guest loyalty program	$	906	$	929	$	6,220	$	6,239

3. LEASES

We determine if a contract contains a lease at inception. Our material operating leases consist of restaurant locations and office space. U.S. GAAP requires that our leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date, and the lease term used in the evaluation includes the non-cancellable

period for which we have the right to use the underlying asset, together with optional lease term extension periods when the exercise of the lease term extension is reasonably certain and failure to exercise such option would result in an economic penalty. All of our restaurant and office space leases are classified as operating leases. We have elected to account for lease and non-lease components as a single lease component for office and beverage gas equipment. We do not have any finance leases.

Lease costs included in “Occupancy and operating” on the Consolidated Statements of Operations consisted of the following (in thousands):


	For the Thirteen Weeks Ended				For the Thirty-Nine Weeks Ended
	October 1, 2024		October 3, 2023		October 1, 2024		October 3, 2023
Lease cost	$	14,315	$	15,133	$	43,146	$	44,817
Variable lease cost		834		700		2,626		3,107
Total lease costs	$	15,149	$	15,833	$	45,772	$	47,924

4. LONG-TERM DEBT

Line of Credit

On November 3, 2021, we entered into a Fourth Amended and Restated Credit Agreement (“Credit Facility”) with Bank of America, N.A. (“BofA”), JPMorgan Chase Bank, N.A., and certain other parties to amend and restate our revolving line of credit (the “Line of Credit”) to improve the pricing, extend the maturity date, change the interest reference rate, eliminate certain financial covenants and conditions, and reset other financial covenants starting with the fourth quarter of 2021.

Our Credit Facility matures on November 3, 2026, and provides us with revolving loan commitments totaling $215 million, which may be increased up to $315 million, of which $50 million may be used for the issuance of letters of credit. Availability under the Credit Facility is reduced by outstanding letters of credit, which are used to support our self-insurance programs. On October 1, 2024, there were borrowings of $66.5 million and letters of credit of $17.2 million outstanding, leaving $131.3 million available to borrow.

Borrowings under the Line of Credit bear interest at an annual rate equal to either (a) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus a percentage not to exceed 2.00% (with a floor on BSBY of 0.00%), or (b) a percentage not to exceed 1.00% above a Base Rate equal to the highest of (i) the Federal Funds Rate plus 1/2 of 1.00%, (ii) BofA’s Prime Rate, (iii) the BSBY rate plus 1.00%, and (iv) 1.00%, in either case depending on the level of lease and debt obligations of the Company as compared to EBITDA plus lease expenses. The weighted average interest rate during the thirty-nine weeks ended October 1, 2024 and October 3, 2023 was approximately 6.9% and 6.6%, respectively. Effective October 29, 2024, we amended our Credit Facility to replace the referenced interest rate from BSBY, which will no longer be reported effective in November 2024, to a term Secured Overnight Financing Rate (“Term SOFR”). See Note 11 for further information.

The Credit Facility is secured by the Company’s assets and contains provisions requiring us to maintain compliance with certain covenants, including a Fixed Charge Coverage Ratio and a Lease Adjusted Leverage Ratio. On October 1, 2024, we were in compliance with these covenants.

Pursuant to the Line of Credit, we are required to pay certain customary fees and expenses associated with maintenance and use of the Line of Credit, including letter of credit issuance fees, unused commitment fees and interest, which are payable monthly. Interest expense and commitment fees under the Credit Facility were approximately $4.0 million and $3.2 million, for the thirty-nine weeks ended October 1, 2024 and October 3, 2023, respectively. We also capitalized approximately $0.2 million and $0.4 million of interest expense related to new restaurant construction during each of the thirty-nine weeks ended October 1, 2024 and October 3, 2023, respectively.

5. NET INCOME PER SHARE

Basic and diluted net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Potentially dilutive shares are excluded from the computation of diluted net (loss) per share since they have an anti-dilutive effect, yet potentially dilutive shares are included in the computation of diluted net income per share. The number of diluted shares reflects the potential dilution that could occur if holders of in-the-money options and warrants were to exercise their right to convert these instruments into common stock and the restrictions on restricted stock units (“RSUs”) were to lapse. Additionally, performance-based RSUs are considered contingent shares; therefore, at each reporting date we determine the probable number of shares that will vest and include these contingently issuable shares in our diluted share calculation unless they are anti-dilutive. Once these performance-based RSUs vest, they are included in our basic net income (loss) per share calculation.

The following table presents a reconciliation of basic and diluted net (loss) income per share, including the number of dilutive equity awards included in the dilutive net (loss) income per share computation (in thousands):


	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
	October 1, 2024			October 3, 2023			October 1, 2024		October 3, 2023
Numerator:
Net (loss) income	$	(2,927	)	$	(3,804	)	$	21,953	$	11,609
Denominator:
Weighted-average shares outstanding – basic		23,111			23,542			23,246		23,521
Dilutive effect of equity awards		—			—			618		465
Weighted-average shares outstanding – diluted		23,111			23,542			23,864		23,986

Net (loss) income per share:
Basic	$	(0.13	)	$	(0.16	)	$	0.94	$	0.49
Diluted	$	(0.13	)	$	(0.16	)	$	0.92	$	0.48

For each of the thirteen weeks ended October 1, 2024 and October 3, 2023, there were approximately 1.0 million and 1.8 million, respectively, of equity awards that were excluded from the calculation of diluted net income (loss) per share because they were anti-dilutive. For each of the thirty-nine weeks ended October 1, 2024 and October 3, 2023, there were approximately 1.0 million and 1.8 million, respectively, of equity awards that were excluded from the calculation of diluted net income per share because they were anti-dilutive.

6. STOCK-BASED COMPENSATION

Our current shareholder approved stock-based compensation plan is the BJ’s Restaurants, Inc. 2024 Equity Incentive Plan, (as it may be amended from time to time, “the Plan”). Under the Plan, we may issue shares of our common stock to team members, officers, directors and consultants. We have historically granted incentive stock options, non-qualified stock options, and service- and performance-based RSUs. In Fiscal 2024, we also granted market-based RSUs. Stock options are charged against the Plan share reserve on the basis of one share for each share of common stock issuable upon exercise of options granted. All options granted under the Plan expire within 10 years of their date of grant. Awards of stock options or stock appreciation rights are charged against the Plan share reserve on the basis of one share for each share granted. All other awards are charged against the 2024 Plan share reserve on the basis of 1.5 shares for each share granted. The Plan also contains other limits on the terms of incentive grants such as the maximum number that can be granted to a team member during any fiscal year.

We use the Black-Scholes option-pricing model to determine the fair value of our stock options, and we use the Monte Carlo simulation model to determine the fair value of our performance-based RSUs, which include a market-based metric. Both models require assumptions to be made regarding our stock price volatility, the expected life of the award, risk-free interest rate and expected dividend rates. The fair value of service-based and performance-based RSUs granted is equal to the fair value of our common stock at market close on the date of grant or the last trading day prior to the date of grant when grants take place on a day when the market is closed. The grant date fair value of each stock option, market-based and service-based RSU is expensed over the vesting period (e.g., one, three or five years) and the fair value of each performance-based RSU is expensed based on the estimated quantity that is expected to vest corresponding with management's current estimate of the level that the performance goal will be achieved.

The following table presents the stock-based compensation recognized within our consolidated financial statements (in thousands):


	For the Thirteen Weeks Ended				For the Thirty-Nine Weeks Ended
	October 1, 2024		October 3, 2023		October 1, 2024		October 3, 2023
Labor and benefits	$	727	$	577	$	1,764	$	1,853
General and administrative	$	185	$	2,092	$	4,392	$	6,236
Capitalized (1)	$	92	$	97	$	255	$	285
Total stock-based compensation	$	1,004	$	2,766	$	6,411	$	8,374

(1)

Capitalized stock-based compensation relates to our restaurant development personnel and is included in “Property and equipment, net” on the Consolidated Balance Sheets.

Stock Options

The fair value of each stock option was estimated on the grant date using the Black‑Scholes option-pricing model with the following weighted average assumptions:


	For the Thirty-Nine Weeks Ended
	October 1, 2024			October 3, 2023
Volatility		67.5	%		66.9	%
Risk-free interest rate		3.9	%		3.5	%
Expected life (years)	5			5
Expected dividend yield		—	%		—	%
Fair value of options granted	$	18.86		$	18.31

Under our stock-based compensation plan, the exercise price of a stock option is required to equal or exceed the fair value of our common stock at market close on the option grant date or the last trading day prior to the date of grant when grants take place on a day when the market is closed. The following table presents stock option activity:


	Options Outstanding					Options Exercisable
	Shares (in thousands)			Weighted Average Exercise Price		Shares (in thousands)		Weighted Average Exercise Price
Outstanding at January 2, 2024		867		$	39.70		648	$	41.65
Granted		141			31.87
Exercised		(5	)		31.54
Forfeited		(80	)		32.34
Outstanding at October 1, 2024		923		$	39.20		741	$	41.10

As of October 1, 2024, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $2.2 million, which is expected to be recognized over the next three years.

Restricted Stock Units

Service-Based Restricted Stock Units

The following table presents service-based restricted stock unit activity:


	Shares (in thousands)			Weighted Average Fair Value
Outstanding at January 2, 2024		822		$	31.46
Granted		257			32.94
Released		(196	)		38.80
Forfeited		(111	)		29.96
Outstanding at October 1, 2024		772		$	30.29

As of October 1, 2024, total unrecognized stock-based compensation expense related to non-vested service-based RSUs was approximately $11.7 million, which is expected to be recognized over the next three to five years.

Performance-Based Restricted Stock Units

The following table presents performance-based restricted stock unit activity:


	Shares (in thousands)			Weighted Average Fair Value
Outstanding at January 2, 2024		128		$	36.24
Awarded		79			39.09
Released		(65	)		46.91
Forfeited		(59	)		32.93
Outstanding at October 1, 2024		83		$	32.89

The fair value of performance-based RSUs, which include a market-based metric, was estimated on the grant date using the Monte Carlo simulation model with the following weighted average assumptions:


	For the Thirty-Nine Weeks Ended
	October 1, 2024			October 3, 2023
Volatility		49.8	%	n/a
Risk-free interest rate		3.8	%	n/a
Expected life (years)	3			n/a
Expected dividend yield		—	%	n/a
Fair value of market-based awards granted	$