CHEESECAKE FACTORY INC Q4 FY2024 earnings call

• Acknowledged recent wildfires in Los Angeles area and extended sympathies. - Ended the year with consistent results; The Cheesecake Factory restaurant comparable sales and traffic outperformed the industry. - 2024 saw record high annual revenues and adjusted earnings per share, and more new restaurants opened than ever. - Ongoing menu innovation with over 20 new items across cuisines. - Development: Opened 9 restaurants in Q4, subsequent to quarter-end opened 5, expect 8 new openings in Q1 2025, expect to open up to 25 new restaurants in 2025 including up to 2 Cheesecake Factory internationally. - Operational updates: Improvements in guest satisfaction, profit flow-through, labor productivity; Cheesecake Factory restaurant level margins 18.4% (highest in over 7 years), North Italia mature locations margin 18.8%, Flower Child comparable sales up 11%.

The Cheesecake Factory: Fourth quarter sales were $669.4 million, with comparable sales increasing 1.7% versus the prior year. North Italia: Sales were $81.3 million, up 21% from the prior year, with annualized AUVs of $7.9 million. Other FRC: Sales totaled $85.1 million, up 20% from the prior year, and sales per operating week were $139,300. Flower Child: Sales totaled $38.2 million, up 25% from the prior year, and sales per operating week were $83,000. External bakery sales were $17.1 million.

• Q1 2025: Total revenues between $920 million and $930 million, estimated $7 million sales impact from inclement weather. - Fiscal 2025: Total revenues midpoint $3.8 billion, sensitivity range ±1%, expected inflation in low to mid-single digits, G&A ~$60 million, depreciation ~$27 million, preopening expenses ~$10 million for Q1, full year net income margin ~4.75%. - Development: Plan to open up to 25 new restaurants in 2025, including 3-4 Cheesecake Factories, 6-7 North Italias, 6-7 Flower Childs, 8-9 FRC restaurants, ~$190 million to $210 million in cash CapEx.

• Wildfires in Los Angeles area impacting operations. - Potential operating or consumer disruptions affecting guidance assumptions. - Commodity inflation and labor cost pressures. - Competition in the casual dining and fast casual sectors.

Q: Matt, just a quick clarification question on your guidance. I think you said $3.8 billion in revenue at the midpoint. And I think last time you might have said $3.75 billion. So just wondering what changed?

A: The unit growth went up, right? We opened one more restaurant than originally guided to last year, and then we increased this year by one as well. And then the timing, right? So we've got 15 restaurants in the first half of the year. So we're just getting more operating weeks in. So that's driving the upside. Our comp assumptions remain consistent as our performance last year, a continuation of that.

Q: Hi. Thanks and good evening. I just wanted to ask about the fourth quarter margin performance. And could you just unpack what some of the upside drivers were in the margins? And I think you noted labor productivity, obviously, some strong labor leverage this quarter. Maybe you could unpack that, I guess, potentially even getting into Cheesecake Factory versus North Italia because each brand saw some nice margin expansion.

A: Sure, Brian. This is Matt. I think there are two things that I would call out. Number one, obviously, it was a strong sales quarter for us, handily beating the upside of the guidance. And there was some great flow-through. I think our restaurants delivered on the extra sales piece of that. And you see that specifically by concept and Flower Child, for example, had tremendous sales and increased profitability. Certainly, at Cheesecake Factory, the continued stability and predictability of our sales trends, coupled with yet again another sequential quarter of improving retention to an all-time high level, has major contributions to the financial statements, particularly in that labor category, right? And so we've just seen a great trend that continued into the fourth quarter and exceeded the third quarter's productivity levels. So I think it's a combination of the sales piece for all of our concepts and then the retention piece. And those two together are really the main drivers. And we did see, I think, exceptional margin performance across the portfolio.