10-Q 1 txrh-20240326x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 26, 2024

OR

  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 000-50972

Texas Roadhouse, Inc.

(Exact name of registrant specified in its charter)

Delaware

20-1083890

(State or other jurisdiction of

(IRS Employer

incorporation or organization)

Identification Number)

6040 Dutchmans Lane

Louisville, Kentucky 40205

(Address of principal executive offices) (Zip Code)

(502) 426-9984

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

TXRH

NASDAQ Global Select Market

Indicate by check mark whether 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 (§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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "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 Exchange Act).   Yes    No  

The number of shares of common stock outstanding were 66,790,637 on April 24, 2024.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1 — Financial Statements (Unaudited) — Texas Roadhouse, Inc. and Subsidiaries

3

Condensed Consolidated Balance Sheets — March 26, 2024 and December 26, 2023

3

Condensed Consolidated Statements of Income — For the 13 Weeks Ended March 26, 2024 and March 28, 2023

4

Condensed Consolidated Statements of Stockholders’ Equity — For the 13 Weeks Ended March 26, 2024 and March 28, 2023

5

Condensed Consolidated Statements of Cash Flows — For the 13 Weeks Ended March 26, 2024 and March 28, 2023

6

Notes to Condensed Consolidated Financial Statements

7

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

14

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

25

Item 4 — Controls and Procedures

25

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings

27

Item 1A — Risk Factors

27

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3 — Defaults Upon Senior Securities

27

Item 4 — Mine Safety Disclosures

27

Item 5 — Other Information

28

Item 6 — Exhibits

28

Signatures

29

2

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

    

March 26, 2024

    

December 26, 2023

Assets

Current assets:

Cash and cash equivalents

$

213,428

$

104,246

Receivables, net of allowance for doubtful accounts of $45 at March 26, 2024 and $35 at December 26, 2023

 

53,906

 

175,474

Inventories, net

 

38,384

 

38,320

Prepaid income taxes

 

 

3,262

Prepaid expenses and other current assets

 

38,677

 

35,172

Total current assets

 

344,395

 

356,474

Property and equipment, net of accumulated depreciation of $1,117,520 at March 26, 2024 and $1,078,855 at December 26, 2023

 

1,499,860

 

1,474,722

Operating lease right-of-use assets, net

715,731

694,014

Goodwill

 

169,684

 

169,684

Intangible assets, net of accumulated amortization of $21,484 at March 26, 2024 and $20,929 at December 26, 2023

 

2,928

 

3,483

Other assets

 

97,803

 

94,999

Total assets

$

2,830,401

$

2,793,376

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of operating lease liabilities

$

27,545

$

27,411

Accounts payable

 

140,287

 

131,638

Deferred revenue-gift cards

 

266,482

 

373,913

Accrued wages

 

85,781

 

68,062

Income taxes payable

14,957

112

Accrued taxes and licenses

 

45,757

 

42,758

Other accrued liabilities

 

105,619

 

101,540

Total current liabilities

 

686,428

 

745,434

Operating lease liabilities, net of current portion

766,516

743,476

Restricted stock and other deposits

 

9,414

 

8,893

Deferred tax liabilities, net

 

23,306

 

23,104

Other liabilities

 

121,621

 

114,958

Total liabilities

 

1,607,285

 

1,635,865

Texas Roadhouse, Inc. and subsidiaries stockholders’ equity:

Preferred stock ($0.001 par value, 1,000,000 shares authorized; no shares issued or outstanding)

 

 

Common stock ($0.001 par value, 100,000,000 shares authorized, 66,846,291 and 66,789,464 shares issued and outstanding at March 26, 2024 and December 26, 2023, respectively)

 

67

 

67

Retained earnings

 

1,207,119

 

1,141,595

Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity

 

1,207,186

 

1,141,662

Noncontrolling interests

 

15,930

 

15,849

Total equity

 

1,223,116

 

1,157,511

Total liabilities and equity

$

2,830,401

$

2,793,376

See accompanying notes to condensed consolidated financial statements.

3

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(in thousands, except per share data)

(unaudited)

13 Weeks Ended

    

March 26, 2024

    

March 28, 2023

Revenue:

Restaurant and other sales

$

1,314,152

$

1,167,583

Franchise royalties and fees

7,065

6,773

Total revenue

 

1,321,217

 

1,174,356

Costs and expenses:

Restaurant operating costs (excluding depreciation and amortization shown separately below):

Food and beverage

 

445,091

410,711

Labor

 

427,547

385,819

Rent

 

19,425

17,828

Other operating

 

193,642

167,529

Pre-opening

 

8,095

5,377

Depreciation and amortization

 

41,493

36,227

Impairment and closure, net

 

201

55

General and administrative

 

52,595

49,865

Total costs and expenses

 

1,188,089

 

1,073,411

Income from operations

 

133,128

 

100,945

Interest income, net

 

1,408

1,238

Equity income from investments in unconsolidated affiliates

 

257

755

Income before taxes

$

134,793

$

102,938

Income tax expense

 

18,803

14,334

Net income including noncontrolling interests

115,990

88,604

Less: Net income attributable to noncontrolling interests

 

2,784

2,217

Net income attributable to Texas Roadhouse, Inc. and subsidiaries

$

113,206

$

86,387

Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:

Basic

$

1.69

$

1.29

Diluted

$

1.69

$

1.28

Weighted average shares outstanding:

Basic

 

66,843

67,016

Diluted

 

67,105

67,293

Cash dividends declared per share

$

0.61

$

0.55

See accompanying notes to condensed consolidated financial statements.

4

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)

For the 13 Weeks Ended March 26, 2024

    

    

    

    

    

Total Texas

    

    

 

Additional

Roadhouse, Inc.

 

Par

Paid-in-

Retained

and

Noncontrolling

 

Shares

Value

Capital

Earnings

Subsidiaries

Interests

Total

 

Balance, December 26, 2023

 

66,789,464

$

67

$

$

1,141,595

$

1,141,662

$

15,849

$

1,157,511

Net income

 

 

 

 

113,206

 

113,206

 

2,784

 

115,990

Distributions to noncontrolling interest holders

 

 

 

 

 

 

(2,703)

 

(2,703)

Dividends declared ($0.61 per share)

 

 

 

 

(40,791)

 

(40,791)

 

 

(40,791)

Shares issued under share-based compensation plans including tax effects

 

171,259

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(54,170)

 

 

(7,473)

 

 

(7,473)

 

 

(7,473)

Repurchase of shares of common stock, including excise tax as applicable

(60,262)

(2,050)

(6,891)

(8,941)

(8,941)

Share-based compensation

 

 

 

9,523

 

 

9,523

 

 

9,523

Balance, March 26, 2024

 

66,846,291

$

67

$

$

1,207,119

$

1,207,186

$

15,930

$

1,223,116

For the 13 Weeks Ended March 28, 2023

    

    

    

    

    

Total Texas

    

    

Additional

Roadhouse, Inc.

Par

Paid-in-

Retained

and

Noncontrolling

Shares

Value

Capital

Earnings

Subsidiaries

Interests

Total

Balance, December 27, 2022

 

66,973,311

$

67

$

13,139

$

999,432

$

1,012,638

$

15,024

$

1,027,662

Net income

 

 

 

 

86,387

 

86,387

 

2,217

 

88,604

Distributions to noncontrolling interest holders

 

 

 

 

 

 

(1,950)

 

(1,950)

Dividends declared ($0.55 per share)

 

 

 

 

(36,878)

 

(36,878)

 

 

(36,878)

Shares issued under share-based compensation plans including tax effects

 

173,620

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(53,874)

 

 

(5,430)

 

 

(5,430)

 

 

(5,430)

Repurchase of shares of common stock, including excise tax as applicable

(92,751)

(9,623)

(9,623)

(9,623)

Share-based compensation

 

 

 

8,154

 

 

8,154

 

 

8,154

Balance, March 28, 2023

 

67,000,306

$

67

$

6,240

$

1,048,941

$

1,055,248

$

15,291

$

1,070,539

See accompanying notes to condensed consolidated financial statements.

5

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

13 Weeks Ended

    

March 26, 2024

    

March 28, 2023

Cash flows from operating activities:

Net income including noncontrolling interests

$

115,990

$

88,604

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

41,493

 

36,227

Deferred income taxes

 

202

 

2,988

Loss on disposition of assets

 

369

 

1,223

Impairment and closure costs

 

(8)

 

Equity income from investments in unconsolidated affiliates

 

(257)

 

(755)

Distributions of income received from investments in unconsolidated affiliates

 

238

 

170

Provision for doubtful accounts

 

9

 

28

Share-based compensation expense

 

9,523

 

8,154

Changes in operating working capital, net of acquisitions:

Receivables

 

121,558

 

109,483

Inventories

 

(64)

 

1,612

Prepaid expenses and other current assets

 

(3,505)

 

(3,224)

Other assets

 

(1,212)

 

(2,265)

Accounts payable

 

13,946

 

10,418

Deferred revenue—gift cards

 

(107,431)

 

(95,838)

Accrued wages

 

17,719

 

11,609

Prepaid income taxes and income taxes payable

 

18,105

 

10,381

Accrued taxes and licenses

 

3,515

 

3,137

Other accrued liabilities

 

5,973

 

3,044

Operating lease right-of-use assets and lease liabilities

 

614

 

1,090

Other liabilities

 

6,662

 

2,895

Net cash provided by operating activities

 

243,439

 

188,981

Cash flows from investing activities:

Capital expenditures—property and equipment

 

(77,672)

(66,733)

Acquisition of franchise restaurants, net of cash acquired

(39,111)

Proceeds from sale of investments in unconsolidated affiliates

472

Proceeds from sale of property and equipment

 

202

 

Proceeds from sale leaseback transactions

2,778

2,072

Net cash used in investing activities

 

(74,692)

 

(103,300)

Cash flows from financing activities:

Payments on revolving credit facility

(50,000)

Distributions to noncontrolling interest holders

 

(2,703)

(1,950)

Proceeds from restricted stock and other deposits, net

 

343

482

Indirect repurchase of shares for minimum tax withholdings

 

(7,473)

(5,430)

Repurchase of shares of common stock

 

(8,941)

(9,623)

Dividends paid to shareholders

 

(40,791)

(36,878)

Net cash used in financing activities

 

(59,565)

 

(103,399)

Net increase (decrease) in cash and cash equivalents

 

109,182

 

(17,718)

Cash and cash equivalents—beginning of period

 

104,246

173,861

Cash and cash equivalents—end of period

$

213,428

$

156,143

Supplemental disclosures of cash flow information:

Interest paid, net of amounts capitalized

$

238

$

411

Income taxes paid

$

497

$

965

Capital expenditures included in current liabilities

$

39,817

$

30,908

See accompanying notes to condensed consolidated financial statements.

6

Texas Roadhouse, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(tabular amounts in thousands, except per share data)

(unaudited)

(1)  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Texas Roadhouse, Inc., our wholly owned subsidiaries and subsidiaries in which we have a controlling interest (collectively, the "Company," "we," "our" and/or "us") as of March 26, 2024 and December 26, 2023 and for the 13 weeks ended March 26, 2024 and March 28, 2023.

The Company maintains three restaurant concepts operating as Texas Roadhouse, Bubba’s 33, and Jaggers. As of March 26, 2024, we owned and operated 644 restaurants and franchised an additional 109 restaurants in 49 states and ten foreign countries. Of the 109 franchise restaurants, there were 59 domestic restaurants and 50 international restaurants. As of March 26, 2023, we owned and operated 611 restaurants and franchised an additional 93 restaurants in 49 states and ten foreign countries. Of the 93 franchise restaurants, there were 54 domestic restaurants and 39 international restaurants.

As of March 26, 2024 and March 28, 2023, we owned a majority interest in 20 company restaurants. The operating results of these majority-owned restaurants are consolidated and the portion of income attributable to noncontrolling interests is reflected in the line item net income attributable to noncontrolling interests in our unaudited condensed consolidated statements of income.

As of March 26, 2024 and March 28, 2023, we owned a 5.0% to 10.0% equity interest in 20 and 19 domestic franchise restaurants, respectively. These unconsolidated restaurants are accounted for using the equity method. Our investments in these unconsolidated affiliates are included in other assets in our unaudited condensed consolidated balance sheets, and we record our percentage share of net income earned by these unconsolidated affiliates in our unaudited condensed consolidated statements of income under equity income from investments in unconsolidated affiliates. All significant intercompany balances and transactions for these unconsolidated restaurants as well as the entities whose accounts have been consolidated have been eliminated.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reporting of revenue and expenses during the periods to prepare these unaudited condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"). Significant items subject to such estimates and assumptions include the valuation of property and equipment, goodwill, lease liabilities and right-of-use assets, obligations related to insurance reserves, legal reserves, income taxes, and gift card breakage. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial statements for the periods presented. The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, except that certain information and footnotes have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. Operating results for the 13 weeks ended March 26, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 26, 2023.

Our significant interim accounting policies include the recognition of income taxes using an estimated annual effective tax rate.

7

(2) Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure. This ASU primarily provides enhanced disclosures about significant segment expenses including requiring segment disclosures to include a description of other segment items by reportable segment and any additional measures of a segment’s profit or loss used by the chief operating decision maker ("CODM") when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods as well as the title of the CODM and an explanation of how the CODM uses the reported measure of segment profit or loss in assessing performance and allocating resources. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently assessing the impact of this new standard on our segment reporting disclosures and expect to provide additional detail and disclosures under this new guidance.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU primarily provides enhanced disclosures about an entity’s income tax including requiring consistent categories and greater disaggregation of the information included in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments in this update are effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. We are currently assessing the impact of this new standard on our income tax disclosures and expect to provide additional detail and disclosures under this new guidance.

(3)   Long-term Debt

We maintain a revolving credit facility (the "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.

We are required to pay interest on outstanding borrowings at the Term Secured Overnight Financing Rate ("SOFR"), plus a fixed adjustment of 0.10% and a variable adjustment of 0.875% to 1.875% depending on our leverage ratio.

As of March 26, 2024 and December 26, 2023, we had no outstanding borrowings under the credit facility and had $295.3 million of availability, net of $4.7 million of outstanding letters of credit.

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

The lenders’ obligation to extend credit pursuant to the credit facility depends on us maintaining certain financial covenants, including a minimum consolidated fixed charge coverage ratio and a maximum consolidated leverage ratio. The credit facility permits us to incur additional secured or unsecured indebtedness, except for the incurrence of secured indebtedness that in the aggregate is equal to or greater than $125.0 million and 20% of our consolidated tangible net worth. We were in compliance with all financial covenants as of March 26, 2024.

8

(4) Revenue

The following table disaggregates our revenue by major source:

13 Weeks Ended

March 26, 2024

March 28, 2023

Restaurant and other sales

$

1,314,152

$

1,167,583

Franchise royalties

6,848

6,019

Franchise fees

217

754

Total revenue

$

1,321,217

$

1,174,356

The following table presents a rollforward of deferred revenue-gift cards:

13 Weeks Ended

March 26, 2024

March 28, 2023

Beginning balance

$

373,913

$

335,403

Gift card activations, net of third-party fees

56,239

50,563

Gift card redemptions and breakage

(163,670)

(145,237)

Ending balance

$

266,482

$

240,729

We recognized restaurant sales of $137.9 million for the 13 weeks ended March 26, 2024 related to amounts in deferred revenue as of December 26, 2023. We recognized restaurant sales of $119.6 million for the 13 weeks ended March 28, 2023 related to amounts in deferred revenue as of December 27, 2022.

(5) Income Taxes

The effective tax rate was 13.9% for the 13 weeks ended March 26, 2024 and March 28, 2023. During the 13 weeks ended March 26, 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.

(6)

Commitments and Contingencies

The estimated cost of completing capital project commitments at March 26, 2024 and December 26, 2023 was $236.5 million and $237.4 million, respectively.

As of March 26, 2024 and December 26, 2023, we were contingently liable for $10.1 million and $10.4 million, respectively, for seven lease guarantees. These amounts represent the maximum potential liability of future payments under the guarantees. In the event of default, the indemnity and default clauses in our assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as of March 26, 2024 and December 26, 2023, as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.

During the 13 weeks ended March 26, 2024 and March 28, 2023, we bought our beef primarily from four suppliers. Although there are a limited number of beef suppliers, we believe that other suppliers could provide a similar product on comparable terms. We have no material minimum purchase commitments with our vendors that extend beyond a year.

Occasionally, we are a defendant in litigation arising in the ordinary course of business, including "slip and fall" accidents, employment related claims, claims related to our service of alcohol, and claims from guests or employees alleging illness, injury or food quality, health or operational concerns.  None of these types of litigation, most of which are covered by insurance at varying retention levels, has had a material adverse effect on us and, as of the date of this report, we are not party to any litigation that we believe could have a material adverse effect on our business.

9

(7)   Acquisitions

On December 28, 2022, the first day of the 2023 fiscal year, we completed the acquisition of eight franchise Texas Roadhouse restaurants located in Maryland and Delaware, including four in which we previously held a 5.0% equity interest. Pursuant to the terms of the acquisition agreements, we paid a total purchase price of $39.1 million, net of cash acquired, for 100% of the entities. The transactions in which we held an equity interest were accounted for as step acquisitions, and we recorded a gain of $0.6 million on our previous investments in equity income from investments in unconsolidated affiliates in the unaudited condensed consolidated statements of income.

These transactions were accounted for using the acquisition method as defined in Accounting Standards Codification 805, Business Combinations. These acquisitions are consistent with our long-term strategy to increase net income and earnings per share.

The following table summarizes the consideration paid for these acquisitions and the estimated fair value of the assets acquired and the liabilities assumed at the acquisition date, which are adjusted for final measurement-period adjustments.

Inventory

$

410

Other assets

293

Property and equipment

 

17,763

Operating lease right-of-use assets

4,775

Goodwill

 

20,067

Intangible assets

 

1,700

Deferred revenue-gift cards

(1,164)

Current portion of operating lease liabilities

 

(110)

Operating lease liabilities, net of current portion

(4,665)

$

39,069

Intangible assets represent reacquired franchise rights which are being amortized over a weighted-average useful life of 2.2 years. We expect all of the goodwill will be deductible for tax purposes and believe the resulting amount of goodwill reflects the benefit of sales and unit growth opportunities as well as the benefit of the assembled workforce of the acquired restaurants.

(8)   Related Party Transactions

As of March 26, 2024 and March 28, 2023, we had four franchise restaurants and one majority-owned company restaurant owned in part by a current officer of the Company. We recognized revenue of $0.5 million for both of the 13 weeks ended March 26, 2024 and March 28, 2023, respectively, related to the four franchise restaurants.

(9)   Earnings Per Share

The share and net income per share data for all periods presented are based on the historical weighted-average shares outstanding.  The diluted earnings per share calculations show the effect of the weighted-average restricted stock units from our equity incentive plans. Performance stock units are not included in the diluted earnings per share calculation until the performance-based criteria have been met.

For all periods presented, the weighted-average shares of nonvested stock units that were outstanding but not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect were not significant.

10

The following table sets forth the calculation of earnings per share and weighted-average shares outstanding as presented in the accompanying unaudited condensed consolidated statements of income:

13 Weeks Ended

    

March 26, 2024

    

March 28, 2023

Net income attributable to Texas Roadhouse, Inc. and subsidiaries

$

113,206

$

86,387

Basic EPS:

Weighted-average common shares outstanding

 

66,843

67,016

Basic EPS

$

1.69

$

1.29

Diluted EPS:

Weighted-average common shares outstanding

 

66,843

67,016

Dilutive effect of nonvested stock units

 

262

277

Shares-diluted

 

67,105

 

67,293

Diluted EPS

$

1.69

$

1.28

(10) Fair Value Measurements

At March 26, 2024 and December 26, 2023, the fair values of cash and cash equivalents, accounts receivable, and accounts payable approximated their carrying values based on the short-term nature of these instruments. There were no transfers among levels within the fair value hierarchy during the 13 weeks ended March 26, 2024.

The following table presents the fair values for our financial assets and liabilities measured on a recurring basis:

Fair Value Measurements

    

Level

    

March 26, 2024

    

March 28, 2023

Deferred compensation plan—assets

 

1

$

84,200

$

64,682

Deferred compensation plan—liabilities

 

1

$

(84,200)

$

(64,476)

We report the accounts of the deferred compensation plan in other assets and the corresponding liability in other liabilities in our unaudited condensed consolidated balance sheets. These investments are considered trading securities and are reported at fair value based on quoted market prices. The realized and unrealized holding gains and losses related to these investments, as well as the offsetting compensation expense, are recorded in general and administrative expense in the unaudited condensed consolidated statements of income.

(11) Stock Repurchase Program

On March 17, 2022, our Board of Directors (the "Board") approved a stock repurchase program under which we may repurchase up to $300.0 million of our common stock. This stock repurchase program has no expiration date. All repurchases to date under our stock repurchase programs have been made through open market transactions. The timing and the amount of any repurchases are determined by management under parameters established by the Board, based on an evaluation of our stock price, market conditions, and other corporate considerations, including complying with Rule 10b5-1 trading arrangements under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

For the 13 weeks ended March 26, 2024, we paid $8.9 million to repurchase 60,262 shares of our common stock. For the 13 weeks ended March 28, 2023, we paid $9.6 million to repurchase 92,751 shares of our common stock. As of March 26, 2024, $107.9 million remained under our authorized stock repurchase program.

(12) Segment Information

We manage our restaurant and franchising operations by concept and as a result have identified Texas Roadhouse, Bubba’s 33, Jaggers, and our retail initiatives as separate operating segments. Our reportable segments are Texas Roadhouse and Bubba’s 33. The Texas Roadhouse reportable segment includes the results of our domestic company

11

Texas Roadhouse restaurants and domestic and international franchise Texas Roadhouse restaurants. The Bubba's 33 reportable segment includes the results of our domestic company Bubba's 33 restaurants. Our remaining operating segments, which include the results of our domestic company and franchise Jaggers restaurants and the results of our retail initiatives, are included in Other. In addition, corporate-related segment assets, depreciation and amortization, and capital expenditures are also included in Other.

Management uses restaurant margin as the primary measure for assessing performance of our segments. Restaurant margin 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. Restaurant margin is used by our CODM to evaluate restaurant-level operating efficiency and performance.

In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance. We exclude pre-opening expense as it occurs at irregular intervals and would impact comparability to prior period results. We exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We exclude impairment and closure expense as we believe this provides a clearer perspective of the Company’s ongoing operating performance and a more useful comparison to prior period results. Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in our industry.

Restaurant and other sales for all operating segments are derived primarily from food and beverage sales. We do not rely on any major customer as a source of sales and the customers and assets of our reportable segments are located predominantly in the United States. There are no material transactions between reportable segments.

The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP:

For the 13 Weeks Ended March 26, 2024

Texas Roadhouse

Bubba's 33

Other

Total

Restaurant and other sales

$

1,236,138

$

70,650

$

7,364

$

1,314,152

Restaurant operating costs (excluding depreciation and amortization)

1,020,925

58,480

6,300

1,085,705

Restaurant margin

$

215,213

$

12,170

$

1,064

$

228,447

Depreciation and amortization

$

34,756

$

3,867

$

2,870

$

41,493

Capital expenditures

67,830

7,960

1,882

77,672

For the 13 Weeks Ended March 28, 2023

Texas Roadhouse

Bubba's 33

Other

Total

Restaurant and other sales

$

1,100,926

$

61,369

$

5,288

$

1,167,583

Restaurant operating costs (excluding depreciation and amortization)

923,936

52,916

5,035

981,887

Restaurant margin

$

176,990

$

8,453

$

253

$

185,696

Depreciation and amortization

$

29,888

$

3,447

$

2,892

$

36,227

Capital expenditures

57,137

6,255

3,341

66,733

12

A reconciliation of restaurant margin to income from operations is presented below. We do not allocate interest income, net and equity income from investments in unconsolidated affiliates to reportable segments.

13 Weeks Ended

March 26, 2024

March 28, 2023

Restaurant margin

$

228,447

$

185,696

Add:

Franchise royalties and fees

7,065

6,773

Less:

Pre-opening

8,095

5,377

Depreciation and amortization

41,493

36,227

Impairment and closure, net

201

55

General and administrative

52,595

49,865

Income from operations

$

133,128

$

100,945

13

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT

This report contains forward-looking statements based on our current expectations, estimates, and projections about our industry and certain assumptions made by us. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will", and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. The section entitled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 26, 2023, and in Part II, Item 1A in this Form 10-Q, along with disclosures in our other Securities and Exchange Commission ("SEC") filings discuss some of the important risk factors that may affect our business, results of operations, or financial condition. You should carefully consider those risks, in addition to the other information in this report, and in our other filings with the SEC, before deciding to invest in our Company or to maintain or increase your investment. We undertake no obligation to revise or update publicly any forward-looking statements, except as may be required by applicable law. The information contained in this Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that discuss our business in greater detail and advise interested parties of certain risks, uncertainties, and other factors that may affect our business, results of operations, or financial condition.

Our Company

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:

644 company restaurants, of which 624 were wholly-owned and 20 were majority-owned.  The results of operations of company restaurants are included in our unaudited condensed consolidated statements of income. The portion of income attributable to noncontrolling interests in company restaurants that are majority-owned is reflected in the line item net income attributable to noncontrolling interests in our unaudited condensed consolidated statements of income. Of the 644 company restaurants, we operated 591 as Texas Roadhouse restaurants, 45 as Bubba’s 33 restaurants, and eight as Jaggers restaurants.

109 franchise restaurants, of which 20 we have a 5.0% to 10.0% ownership interest. The income derived from our minority interests in these franchise restaurants is reported in the line item equity income from investments in unconsolidated affiliates in our unaudited condensed consolidated statements of income. Of the 109 franchise restaurants, 56 were domestic Texas Roadhouse restaurants, three were domestic Jaggers restaurants, and 50 were international Texas Roadhouse restaurants.

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.

Throughout this report, we use the term "restaurants" to include Texas Roadhouse and Bubba’s 33, unless otherwise noted.

14

Presentation of Financial and Operating Data

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.

Key Measures We Use to Evaluate Our Company

Key measures we use to evaluate and assess our business include the following:

Comparable Restaurant Sales.  Comparable restaurant sales reflect the change in sales for all company restaurants across all concepts, unless otherwise noted, over the same period of the prior year for the comparable restaurant base. We define the comparable restaurant base to include those restaurants open for a full 18 months before the beginning of the period measured excluding restaurants permanently closed during the period. Comparable restaurant sales can be impacted by changes in guest traffic counts or by changes in the per person average check amount. Menu price changes, the mix of menu items sold, and the mix of dine-in versus to-go sales can affect the per person average check amount.

Average Unit Volume.  Average unit volume represents the average quarterly or annual restaurant sales for Texas Roadhouse and Bubba’s 33 restaurants open for a full six months before the beginning of the period measured excluding sales of restaurants permanently closed during the period. Historically, average unit volume growth is less than comparable restaurant sales growth which indicates that newer restaurants are operating with sales growth levels lower than the company average. At times, average unit volume growth may be more than comparable restaurant sales growth which indicates that newer restaurants are operating with sales growth levels higher than the company average.

Store Weeks and New Restaurant Openings.  Store weeks represent the number of weeks that all company restaurants across all concepts, unless otherwise noted, were open during the reporting period. Store weeks include weeks in which a restaurant is temporarily closed. Store week growth is driven by new restaurant openings and franchise acquisitions. New restaurant openings reflect the number of restaurants opened during a particular fiscal period, excluding store relocations. We consider store openings that occur simultaneously with a store closure in the same trade area to be a relocation.

Restaurant Margin. Restaurant margin (in dollars, as a percentage of restaurant and other sales, and per store week) represents restaurant and other sales less restaurant-level operating costs, including food and beverage costs, labor, rent, and other operating costs. Restaurant margin is not a measurement determined in accordance with U.S. generally accepted accounting principles ("GAAP") and should not be considered in isolation, or as an alternative, to income from operations. This non-GAAP measure is not indicative of overall company performance and profitability in that this measure does not accrue directly to the benefit of shareholders due to the nature of the costs excluded. Restaurant margin is widely regarded as a useful metric by which to evaluate core restaurant-level operating efficiency and performance over various reporting periods on a consistent basis.

In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance. We exclude pre-opening expense as it occurs at irregular intervals and would impact comparability to prior period results. We exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We exclude impairment and closure expense as we believe this provides a clearer perspective of the Company’s ongoing operating performance and a more useful comparison to prior period results. Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in our industry. A reconciliation of income from operations to restaurant margin is included in the Results of Operations section below.

15

Other Key Definitions

Restaurant and Other Sales.  Restaurant sales include gross food and beverage sales, net of promotions and discounts, for all company restaurants. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from restaurant sales in our unaudited condensed consolidated statements of income. 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.
Franchise Royalties and Fees.  Franchise royalties consist of royalties, as defined in our franchise agreement, paid to us by our domestic and international franchisees. Domestic and international franchisees also typically pay an initial franchise fee and/or development fee for each new restaurant or territory.

Food and Beverage Costs.  Food and beverage costs consist of the costs of raw materials and ingredients used in the preparation of food and beverage products sold in our company restaurants. Approximately half of our food and beverage costs relate to beef.

Restaurant Labor Expenses.  Restaurant labor expenses include all direct and indirect labor costs incurred in operations except for profit sharing incentive compensation expenses earned by our restaurant managing partners and market partners. These profit sharing expenses are reflected in restaurant other operating expenses. Restaurant labor expenses also include share-based compensation expense related to restaurant-level employees.

Restaurant Rent Expense.  Restaurant rent expense includes all rent, except pre-opening rent, associated with the leasing of real estate and includes base, percentage, and straight-line rent expense.

Restaurant Other Operating Expenses.  Restaurant other operating expenses consist of all other restaurant-level operating costs, the major components of which are credit card fees, profit sharing incentive compensation for our restaurant managing partners and market partners, utilities, supplies, general liability insurance, advertising, repairs and maintenance, property taxes, and outside services.

Pre-opening Expenses.  Pre-opening expenses, which are charged to operations as incurred, consist of expenses incurred before the opening of a new or relocated restaurant and consist principally of opening and training team compensation and benefits, travel expenses, rent, food, beverage, and other initial supplies and expenses. The majority of pre-opening costs incurred relate to the hiring and training of employees due to the significant investment we make in training our people. Pre-opening costs vary by location depending on a number of factors, including the size and physical layout of each location; the number of management and hourly employees required to operate each restaurant; the availability of qualified restaurant staff members; the cost of travel and lodging for different geographic areas; the timing of the restaurant opening; and the extent of unexpected delays, if any, in obtaining final licenses and permits to open each restaurant.

Depreciation and Amortization Expenses.  Depreciation and amortization expenses include the depreciation of fixed assets and amortization of intangibles with definite lives, substantially all of which relates to restaurant-level assets.

Impairment and Closure Costs, Net. Impairment and closure costs, net include any impairment of long-lived assets, including property and equipment, operating lease right-of-use assets, and goodwill, and expenses associated with the closure of a restaurant. Closure costs also include any gains or losses associated with a relocated restaurant or the sale of a closed restaurant and/or assets held for sale as well as costs associated with closed or relocated restaurants.

General and Administrative Expenses. General and administrative expenses comprise expenses associated with corporate and administrative functions that support development and restaurant operations and provide an infrastructure to support future growth. This includes salary, incentive-based and share-based compensation expense related to executive officers and Support Center employees, salary and share-based compensation

16

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.

Interest Income, Net. Interest income, net includes earnings on cash and cash equivalents and is reduced by interest expense, net of capitalized interest, on our debt or financing obligations including the amortization of loan fees, as applicable.

Equity Income from Investments in Unconsolidated Affiliates. Equity income includes our percentage share of net income earned by unconsolidated affiliates and our share of any gain on the acquisition of these affiliates. As of March 26, 2024, and March 28, 2023, we owned a 5.0% to 10.0% equity interest in 20 and 19 domestic franchise restaurants, respectively.

Net Income Attributable to Noncontrolling Interests. Net income attributable to noncontrolling interests represents the portion of income attributable to the other owners of the majority-owned restaurants. Our consolidated subsidiaries include 20 majority-owned restaurants for all periods presented.

Q1 2024 Financial Highlights

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.

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.

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%.

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

17

Results of Operations

(in thousands)

13 Weeks Ended

March 26, 2024

March 28, 2023

  

$

  

%

  

$

  

%

Condensed Consolidated Statements of Income:

Revenue:

Restaurant and other sales

1,314,152

99.5

1,167,583

99.4

Franchise royalties and fees

7,065

0.5

6,773

0.6

Total revenue

1,321,217

100.0

1,174,356

100.0

Costs and expenses:

(As a percentage of restaurant and other sales)

Restaurant operating costs (excluding depreciation and amortization shown separately below):

Food and beverage

445,091

33.9

410,711

35.2

Labor

427,547

32.5

385,819

33.0

Rent

19,425

1.5

17,828

1.5

Other operating

193,642

14.7

167,529

14.3

(As a percentage of total revenue)

Pre-opening

8,095

0.6

5,377

0.5

Depreciation and amortization

41,493

3.1

36,227

3.1

Impairment and closure, net

201

NM

55

NM

General and administrative

52,595

4.0

49,865

4.2

Total costs and expenses

1,188,089

89.9

1,073,411

91.4

Income from operations

133,128

10.1

100,945

8.6

Interest income, net

1,408

0.1

1,238

0.1

Equity income from investments in unconsolidated affiliates

257

NM

755

0.1

Income before taxes

134,793

10.2

102,938

8.8

Income tax expense

18,803

1.4

14,334

1.2

Net income including noncontrolling interests

115,990

8.8

88,604

7.5

Net income attributable to noncontrolling interests

2,784

0.2

2,217

0.2

Net income attributable to Texas Roadhouse, Inc. and subsidiaries

113,206

8.6

86,387

7.4

NM — Not meaningful

18

Reconciliation of Income from Operations to Restaurant Margin

(in thousands)

13 Weeks Ended

March 26, 2024

March 28, 2023

Income from operations

$

133,128

$

100,945

Less:

Franchise royalties and fees

7,065

6,773

Add:

Pre-opening

8,095

5,377

Depreciation and amortization

41,493

36,227

Impairment and closure, net

201

55

General and administrative

52,595

49,865

Restaurant margin

$

228,447

$

185,696

Restaurant margin $/store week

$

27,577

$

23,505

Restaurant margin (as a percentage of restaurant and other sales)

17.4%

15.9%

See above for the definition of restaurant margin.

Restaurant Unit Activity

    

Total

Texas Roadhouse

Bubba's 33

    

Jaggers

Balance at December 26, 2023

 

741

686

45

 

10

Company openings

 

9

9

Franchise openings - Domestic

1

1

Franchise openings - International

 

2

2

Balance at March 26, 2024

 

753

697

45

 

11

 

March 26, 2024

 

March 28, 2023

Company - Texas Roadhouse

 

591

564

Company - Bubba's 33

 

45

40

Company - Jaggers

 

8

7

Total company

644

611

Franchise - Texas Roadhouse - Domestic

 

56

54

Franchise - Jaggers - Domestic

3

Franchise - Texas Roadhouse - International

 

50

39

Total franchise

109

93

Total

 

753

 

704

19