Texas Roadhouse, Inc. — Q1 2024 Form 10-Q
Business context and period. The filing covers the 13 weeks ended March 26, 2024, compared with the 13 weeks ended March 28, 2023. Texas Roadhouse operates Texas Roadhouse, Bubba’s 33, and Jaggers. At quarter-end, it had 644 company-operated and 109 franchised restaurants, 753 in total, across 49 states and 10 foreign countries. Fiscal 2024 is a 53-week year, with a 14-week fourth quarter.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $1,321.2 million | $1,174.4 million | +12.5% |
| Restaurant and other sales | $1,314.2 million | $1,167.6 million | +12.6% |
| Income from operations | $133.1 million | $100.9 million | +31.9% |
| Net income attributable to Texas Roadhouse | $113.2 million | $86.4 million | +31.0% |
| Diluted EPS | $1.69 | $1.28 | +31.4% |
| Restaurant margin (non-GAAP) | $228.4 million; 17.4% | $185.7 million; 15.9% | +23.0%; +1.5 percentage points |
Sales drivers and costs. Company comparable restaurant sales rose 8.4%, with guest traffic up 4.3% and average check up 4.1%. Store weeks increased 4.9%, primarily from new openings. Food and beverage costs fell to 33.9% of restaurant sales from 35.2%; labor costs fell to 32.5% from 33.0%. Other operating costs increased to 14.7% from 14.3%, including a $4.4 million increase in general liability insurance expense. Operating income margin was 10.1%, versus 8.6%; net income attributable margin was 8.6%, versus 7.4%.
Cash flow, liquidity, and capital
Operating cash flow was $243.4 million, up from $189.0 million. Investing cash outflow was $74.7 million, including $77.7 million of capital expenditures; the prior-year outflow included the $39.1 million acquisition of eight franchise restaurants. Financing cash outflow was $59.6 million. Cash increased by $109.2 million to $213.4 million from $104.2 million at December 26, 2023. The company paid $40.8 million in dividends and repurchased $8.9 million of shares during the quarter.
The company had no borrowings under its $300 million revolving credit facility and reported $295.3 million of availability, net of letters of credit. The facility matures May 1, 2026; the company reported compliance with financial covenants. Operating lease liabilities were $27.5 million current and $766.5 million long term. Current assets were $344.4 million and current liabilities were $686.4 million, including $266.5 million of gift-card deferred revenue.
Outlook, risks, and notable items
- Management expects 2024 store-week growth of approximately 8% across concepts, including a 2% contribution from the 53rd week, and capital expenditures of approximately $340 million to $350 million.
- Management expects 2024 commodity inflation of approximately 3%, with about 60% of remaining forecast costs locked, and labor-cost inflation of 4% to 5%. The expected effective tax rate is approximately 14%. A 2.2% menu price increase was implemented in early Q2 2024.
- Management attributed margin improvement to higher sales, check growth, and labor productivity, partly offset by insurance expense and labor inflation. Beef represented approximately half of food and beverage costs; the company primarily sourced beef from four suppliers and does not hedge commodity prices with financial instruments.
- Capital project commitments were estimated at $236.5 million. Seven lease guarantees had a maximum potential exposure of $10.1 million; no material liability was recorded because default was considered less than probable. Management reported no litigation believed likely to have a material adverse effect and no material change to previously disclosed risk factors.
- Q1 impairment and closure costs were $0.2 million, including costs related to a planned restaurant relocation. Pre-opening expenses increased to $8.1 million from $5.4 million, primarily due to the number and timing of openings.
Important facts for investors to verify
- Whether comparable-sales momentum, including traffic and average-check growth, is sustained and how the Q2 price increase affects guest demand.
- Whether expected commodity and labor inflation, insurance claims experience, and the ability to pass costs through pricing align with management’s assumptions.
- Whether planned restaurant openings, approximately 8% store-week growth, and $340 million to $350 million of capital spending are achieved.
- How much of operating cash flow reflects recurring earnings versus working-capital movements, including receivables and gift-card deferred revenue.
- The company’s capacity to fund investment and shareholder returns while managing lease obligations, capital commitments, and contingent lease guarantees.