BJ’s Restaurants, Inc. — Form 10-Q Summary
Period and business context. The filing covers the 13 and 26 weeks ended July 4, 2023, with comparisons to periods ended June 28, 2022. This conflicts with the request metadata identifying 2021 Q2; the filing itself is for 2023 Q2. BJ’s operated 215 company-owned casual dining restaurants in 30 states as of August 7, 2023.
Key financial results
| Metric | 13 weeks ended July 4, 2023 | Comparable 2022 period | 26 weeks ended July 4, 2023 | Comparable 2022 period |
|---|---|---|---|---|
| Revenue | $349.7 million | $329.7 million | $691.0 million | $628.4 million |
| Operating income (loss) | $10.2 million | $3.1 million | $12.8 million | $(4.5) million |
| Net income | $11.9 million | $0.3 million | $15.4 million | $1.8 million |
| Diluted EPS | $0.50 | $0.01 | $0.64 | $0.07 |
| Operating margin | 2.9% | 1.0% | 1.9% | (0.7)% |
| Net margin | 3.4% | 0.1% | 2.2% | 0.3% |
Revenue and comparable sales. Revenue increased 6.1% in the quarter and 9.9% year to date. Comparable restaurant sales grew 4.7% and 6.8%, respectively. Management attributed the gains primarily to higher average checks, including menu pricing; guest traffic declined approximately 2.9% in the quarter and 0.4% year to date.
Costs and profitability. Cost of sales fell to 25.9% of quarterly revenue from 27.6%, and to 26.3% year to date from 27.4%, reflecting easing food-cost inflation, menu pricing and savings initiatives. Labor and benefits were 36.2% of quarterly revenue versus 37.3%, and 36.9% year to date versus 38.1%. Quarterly G&A rose to 6.1% of revenue from 5.1%, including higher personnel, deferred-compensation and incentive costs. Year-to-date asset disposal and impairment losses rose to $3.3 million from $0.6 million. Net income included income tax benefits of $2.2 million for the quarter and $4.0 million year to date.
Cash flow, debt and liquidity
- First-half operating cash flow was $41.6 million, up from $30.2 million. Capital expenditures were $52.9 million, compared with $31.1 million; operating cash flow less capital expenditures was approximately negative $11.3 million.
- Cash declined to $6.1 million from $24.9 million at January 3, 2023. The company said $19.2 million of credit-card revenue was recorded in receivables on the July 4 banking holiday and subsequently collected.
- Long-term debt was $53.0 million, down from $60.0 million at year-end. The $215 million revolving facility matures November 3, 2026; $145.8 million was available after borrowings and letters of credit. The first-half weighted-average interest rate was approximately 6.6%, versus 2.2% in 2022; the company reported covenant compliance.
- Current ratio was 0.4:1.0 and net working capital was negative $118.1 million. Operating lease obligations totaled approximately $459.6 million, including current and long-term amounts.
- There were no share repurchases during the first half. Approximately $22.1 million remained under the repurchase authorization. Regular quarterly cash dividends remained suspended.
Outlook, commentary and risks
- Management expects fiscal 2023 capital expenditures of approximately $90 million to $95 million, including up to five new restaurants and remodeling 35 to 40 existing locations. Two restaurants had opened and three had closed year to date as of August 7, 2023. Management believes cash, operating cash flow and credit availability will cover needs for at least the next 12 months.
- Management cited ongoing inflation’s effects on restaurant operations and construction, and cautioned that menu pricing, cost savings and purchasing efficiencies may not fully offset future cost increases. Higher prices could affect guest traffic and purchasing behavior. Commodity availability, supplier disruptions, weather and seasonality may also affect results.
- Legal claims arise in the ordinary course, including self-insured exposures; management did not expect their disposition to materially affect financial position, results or liquidity, while noting outcomes could affect a particular period. No material changes to previously disclosed risk factors were reported.
- The company recorded a $0.1 million first-half loss on its 20% equity-method investment in a software company, which has ties to a retired CEO and a director. No material changes in critical accounting policies or internal controls were reported.
Important facts for investors to verify
- Confirm the reporting-period discrepancy: the supplied metadata says 2021 Q2, but the filing reports the quarter ended July 4, 2023.
- Assess whether comparable-sales growth driven by pricing can continue given lower guest traffic.
- Track cash conversion and the planned increase in remodel and new-restaurant spending, alongside the low cash balance and credit-facility usage.
- Review the effect of higher floating interest rates, lease obligations, and future food, labor and construction costs on margins and liquidity.
- Evaluate the tax benefits’ contribution to reported net income and any future changes in tax credits or uncertain tax positions.