Business Context and Reporting Period
Company: Texas Roadhouse, Inc.
Filing Type: Form 10-Q (Unaudited)
Reporting Period: 13 weeks ended March 31, 2026 (Q1 2026)
Business Overview: The Company operates three restaurant concepts: Texas Roadhouse, Bubba's 33, and Jaggers. As of March 31, 2026, the system included 822 total restaurants (723 company-owned and 99 franchised) across 49 states, one U.S. territory, and ten foreign countries.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $1,633.2 million | $1,447.6 million |
| Net Income (Attributable to TXRH) | $123.4 million | $113.7 million |
| Diluted EPS | $1.87 | $1.70 |
| Restaurant Margin | $264.4 million (16.3%) | $239.3 million (16.6%) |
| Operating Cash Flow | $259.1 million | $237.7 million |
| Cash and Equivalents (End of Period) | $214.6 million | $221.1 million |
| Long-term Debt | $50.0 million | $0 |
| Capital Expenditures | $80.2 million | $77.4 million |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 12.8% year-over-year, driven by a 7.1% increase in comparable restaurant sales and a 5.7% increase in store weeks. Comparable sales growth was fueled by a 4.5% increase in guest traffic and a 2.6% increase in the per-person average check.
- Profitability: Net income rose 8.6% to $123.4 million. However, restaurant margin percentage declined from 16.6% to 16.3% due to commodity inflation (6.2%) and wage inflation (3.8%), partially offset by higher sales volume.
- Cost Structure: Food and beverage costs as a percentage of sales increased to 35.3% (from 34.1%) due to higher beef costs. Labor costs as a percentage of sales decreased to 32.9% (from 33.3%) due to productivity gains and higher average checks.
- Acquisitions: The Company acquired five domestic franchise restaurants for $71.8 million during the quarter, reducing royalty revenue but increasing direct sales.
- Debt: The Company drew $50.0 million on its revolving credit facility during the quarter, resulting in $50.0 million in outstanding borrowings as of March 31, 2026, compared to zero in the prior year.
Guidance, Outlook, and Risks
- 2026 Guidance:
- Store Week Growth: Expected to be 5% to 6% across all concepts.
- Commodity Inflation: Forecasted at 6% to 7% for the full year.
- Wage Inflation: Forecasted at 3% to 4% for the full year.
- Capital Expenditures: Expected to be approximately $400 million for the fiscal year.
- Effective Tax Rate: Expected to be 14% to 15%.
- Capital Allocation: The Company continues to prioritize share repurchases ($351.8 million remaining under the current $500 million authorization) and dividends (increased to $0.75 per share quarterly).
- Risks and Contingencies:
- Supply Chain: Beef is a significant cost component; the Company relies on four primary suppliers. Disruption could lead to higher costs.
- Legal: Routine litigation (e.g., slip and fall, employment claims) is ongoing but not considered material.
- Guarantees: Contingent liability of $7.6 million exists for five lease guarantees.
Investor Verification Checklist
- Margin Compression: Verify the sustainability of the 16.3% restaurant margin given the 6.2% commodity inflation and 3.8% wage inflation headwinds.
- Acquisition Integration: Assess the impact of the $71.8 million franchise acquisition on future royalty revenue versus direct operating income.
- Debt Utilization: Monitor the $50 million draw on the credit facility and the associated interest expense (rate was 4.77% as of March 31, 2026).
- Gift Card Liability: Note the significant decrease in deferred revenue (gift cards) from $448.7 million to $330.4 million, indicating high redemption rates or lower holiday sales carryover.
- Share Count: Confirm the impact of the $28.2 million in share repurchases on future earnings per share dilution.