Texas Roadhouse, Inc. — FY2023 Form 10-K
Business context and reporting period. Texas Roadhouse operates Texas Roadhouse, Bubba’s 33 and Jaggers restaurants. The fiscal year ended December 26, 2023, comprised 52 weeks; the fourth quarter comprised 13 weeks. The filing is an annual report, and the supplied text does not provide a clear set of standalone Q4 financial results. At year-end, the company had 741 restaurants: 635 company-operated and 106 franchised, across 49 states and 10 foreign countries.
Financial performance and liquidity
| Metric | FY2023 | FY2022 | Change / context |
|---|---|---|---|
| Total revenue | $4.632 billion | $4.015 billion | Up 15.4% |
| Net income attributable to Texas Roadhouse | $304.9 million | $269.8 million | Up 13.0%; net margin was 6.6% vs. 6.7% |
| Diluted EPS | $4.54 | $3.97 | Up 14.3% |
| Income from operations | $354.0 million | $320.2 million | Operating margin was 7.6% vs. 8.0% |
| Restaurant margin | $708.0 million; 15.4% | $627.5 million; 15.7% | Non-GAAP measure; dollars up 12.8%, margin rate down |
| Cash from operating activities | $565.0 million | $511.7 million | Increased $53.3 million |
| Capital expenditures | $347.0 million | $246.1 million | Higher spending on new restaurants and existing-store upgrades |
| Cash and cash equivalents | $104.2 million | $173.9 million | Cash decreased $69.6 million during FY2023 |
- Company comparable restaurant sales increased 10.1%, reflecting traffic growth of 5.4% and average-check growth of 4.7%. Store weeks rose 5.8%.
- Food and beverage costs were 34.6% of restaurant and other sales in both years. Labor costs rose to 33.4% from 33.1%; other operating costs rose to 15.0% from 14.9%.
- Cash used in investing activities was $367.2 million; cash used in financing activities was $267.4 million. The company paid $147.2 million in shareholder dividends and repurchased $50.0 million of stock.
- No credit-facility borrowings were outstanding at year-end; $295.3 million was available after letters of credit. The $300 million revolving facility matures May 1, 2026, and the company reported covenant compliance.
- Operating lease liabilities were $770.9 million. Undiscounted real-estate lease payments totaled $1.332 billion. Current assets were $356.5 million and current liabilities were $745.4 million; management notes restaurant operations can function with negative working capital.
Material changes versus FY2022
- Revenue growth reflected higher comparable sales, new restaurant openings and acquired franchise restaurants. Net income and EPS increased, while operating margin and restaurant margin percentage declined under cost pressure.
- Traffic contributed more to comparable-sales growth in FY2023, while average-check growth slowed: traffic rose 5.4% versus 1.9% in FY2022; average check rose 4.7% versus 7.8%.
- The company opened 30 company restaurants and franchise partners opened 15; the system grew from 697 to 741 locations. The company also acquired eight domestic Texas Roadhouse franchise restaurants for approximately $39.1 million.
- Capital expenditures increased to $347.0 million from $246.1 million. Stock repurchases fell to $50.0 million from $212.9 million, while dividends paid rose to $147.2 million from $124.1 million.
- The effective tax rate declined to 12.5% from 13.6%, primarily due to higher FICA tip credits and excess tax benefits from share-based compensation.
Outlook, management commentary and risks
- For 2024, management expects store-week growth of approximately 8% across concepts, including a 2% benefit from the 53rd week. Expected capital expenditures are $340–$350 million.
- Management expects commodity inflation of approximately 5% in 2024, with about 40% of forecast costs locked and the balance subject to floating market prices. Expected labor-cost inflation is 4%–5%; the forecast effective tax rate is approximately 14%.
- Average new-store capital investment is expected to be about $7.9 million for Texas Roadhouse and $8.5 million for Bubba’s 33 in 2024. Management says inflation has been partly offset by pricing, but future ability or willingness to offset cost increases is uncertain.
- Key risks include beef and other commodity cost or supply volatility, labor availability and wage inflation, competition and discretionary-spending weakness, execution and returns on new locations, food safety and litigation, and cybersecurity or third-party technology disruptions. About 21% of company restaurants are in Texas and Florida, creating geographic concentration exposure.
- Unusual or notable items included a $2.6 million executive separation payout, a change in gift-card breakage estimate that reduced the 2023 breakage adjustment to $3.7 million from $6.6 million, and $0.3 million of impairment and closure costs. The company reported no litigation it believed would have a material adverse effect; seven lease guarantees had a maximum potential liability of $10.4 million, with no material liability recorded.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. The auditor identified assessment of potential long-lived-asset impairment indicators as a critical audit matter; management reported effective internal controls.
Important facts for investors to verify
- Whether sales and traffic momentum continues, and how comparable sales evolve as pricing and the 53rd week affect reported growth.
- Whether forecast commodity and labor inflation, particularly beef costs, compresses restaurant margins further or is offset by pricing, traffic and productivity.
- Returns on the elevated development and refurbishment program, including new-store costs, openings, acquired franchise locations and 2024 capital spending.
- Cash generation and capital allocation capacity after dividends, buybacks, lease obligations and restaurant investment; confirm revolver availability and covenant headroom.
- Assumptions behind gift-card breakage, self-insurance reserves and restaurant impairment testing, including any future changes in claims experience or store cash flows.