BJ’s Restaurants, Inc. — Form 10-Q Summary
Period: The filing covers the thirteen weeks ended April 4, 2023, compared with the thirteen weeks ended March 29, 2022. The request metadata says “2021 Q1,” but that does not match the filing period. BJ’s operated 216 company-owned restaurants in 30 states as of May 8, 2023.
Financial performance
| Metric | Q1 2023 | Comparable 2022 period |
|---|---|---|
| Revenue | $341.3 million | $298.7 million |
| Operating income (loss) | $2.6 million | $(7.7) million |
| Net income | $3.5 million | $1.5 million |
| Diluted EPS | $0.15 | $0.06 |
| Cash from operations | $31.9 million | $0.6 million |
| Capital expenditures | $27.0 million | $12.1 million |
- Revenue rose 14.2%. Comparable restaurant sales increased 9.0%, driven by estimated guest traffic growth of 2.2% and average-check growth of 6.8%, including menu price increases. New restaurants and the fiscal 2022 calendar shift also contributed.
- Operating margin improved to 0.8% from negative 2.6%; net margin was 1.0% versus 0.5%. Cost of sales fell to 26.6% of revenue from 27.3%; labor and benefits to 37.6% from 38.9%; occupancy and operating costs to 23.2% from 24.0%; and G&A to 5.8% from 6.1%.
- Net income benefited from a $1.8 million income tax benefit; the reported effective tax benefit rate was 105.9%, primarily reflecting FICA tip credits. Pre-tax income was $1.7 million.
- Operating cash flow increased substantially, but management attributed much of the year-over-year change to payment timing for accrued expenses and deferred taxes, as well as improved net income. Investing cash outflow was $27.0 million, mainly for restaurant development, remodels and productivity initiatives.
Liquidity, debt and balance sheet
- Cash was $29.3 million at April 4, 2023, up from $24.9 million at January 3, 2023. Net working capital was negative $112.4 million and the current ratio was 0.4:1.
- Long-term debt was $60.0 million. The $215 million revolving credit facility matures November 3, 2026; $16.2 million of letters of credit were also outstanding, leaving $138.8 million available. The company reported compliance with its financial covenants.
- The weighted-average borrowing rate was approximately 6.4%, versus 2.1% a year earlier. The company estimated that a 1 percentage-point rate change would affect annual net income by about $0.5 million at the outstanding balance.
- Operating lease obligations were $465.4 million in total, including current and long-term portions; leases are a significant component of the company’s restaurant operating and funding structure.
Outlook, risks and notable items
- Management planned to open as many as five restaurants in fiscal 2023 and anticipated fiscal-year capital expenditures of approximately $90–$95 million, including more than 30 remodels. As of May 8, two restaurants had opened and two had closed. Management expected to fund investment with cash, operating cash flow and the credit facility.
- Management said available cash, expected operating cash flow and credit availability should be adequate for capital expenditure and working-capital needs for at least the next twelve months, while noting dependence on future economic and business conditions.
- Management cited inflation, commodity and labor costs, supply-chain and distribution disruptions, construction costs, and consumer discretionary spending as risks. Pricing and efficiency measures have partly offset cost pressures, but may not continue to do so without affecting guest traffic or purchasing patterns.
- Q1 included $2.1 million of net asset disposal and impairment costs, primarily related to restaurant updates, including removal of pandemic-era dining-room glass partitions. Interest expense increased to $1.1 million, mainly because borrowing rates were higher.
- The company reported ordinary-course legal claims, including matters related to guests, employees, real estate and intellectual property; management did not expect their disposition to materially affect financial position, results or liquidity. No material changes to previously disclosed risk factors were reported.
- Quarterly cash dividends remained suspended. No shares were repurchased during the quarter; approximately $22.1 million remained under the existing repurchase authorization.
Important facts for investors to verify
- Confirm the reporting-period discrepancy: this is a Q1 2023 filing, not a 2021 Q1 filing.
- Assess whether comparable-sales growth and improved cost ratios persist, particularly as menu pricing, traffic, wages and commodity costs evolve.
- Separate recurring operating cash generation from the quarter’s favorable working-capital and tax-related timing effects.
- Monitor the planned $90–$95 million capital program, restaurant openings and remodel returns against available liquidity and lease obligations.
- Review the impact of floating-rate debt, covenant headroom, self-insurance exposures and ongoing legal contingencies.