Texas Roadhouse, Inc. Q3 FY2024 earnings call

• Strong third quarter results with 8.5% same-store sales growth and ~$1.3 billion revenue. - Visited international and domestic franchise restaurants, with operators showing high pride and passion. - Opened 7 company-owned locations in Q3; expect ~30 restaurant openings in 2025, including a tentative agreement to acquire 13 franchise restaurants. - Rolled out new menus in Q4 with a price increase <1%. - Technology initiatives ongoing, with over 200 digital kitchen conversions completed in 2024 and aim to convert nearly all restaurants to digital kitchen by end of 2025. - Celebrated 20 years as a public company and partnership with Homes For Our Troops.

For the third quarter, Texas Roadhouse reported revenue growth of 13.5%. Average weekly sales at Texas Roadhouse were $153,000, at Bubba's 33 were $117,000, and at Jaggers (quick-service brand) were $72,000. Comparable sales increased 8.5% in Q3, driven by 3.8% traffic growth and a 4.7% increase in average check. To-go sales represented 12.7% of total weekly sales in Q3.

• 2025 target ~30 company-owned restaurant openings across all brands. - Tentative agreement to acquire 13 franchise restaurants at start of 2025. - 2025 capital expenditure guidance ~$400 million (excluding acquisition costs). - Updated 2024 commodity inflation guidance to <1% and 2025 guidance to 2%-3%. - 2024 labor inflation guidance narrowed to ~4.5%, 2025 guidance 4%-5% with mandated increases up to 1.5%.

• Commodity inflation volatility, with beef costs being a key factor and other items potentially affecting. - Labor cost adjustments due to insurance claims experience, which are unpredictable. - Competitive environment impact on market share, though no significant immediate negative impact observed yet.

Q: About labor leverage in the quarter and if adjustments in labor line will continue.

A: Michael Bailen said some adjustments are from insurance claims which are unpredictable, but labor productivity seen can continue through end of year. Chris Monroe added on self-insurance and labor productivity improvement.

Q: On commodity inflation guidance, especially beef.

A: Michael Bailen said 2024 beef drives most inflation with other items flat/deflationary; 2025 beef drives majority with other items flat. Chris Monroe discussed beef supply-demand dynamics and retail demand impact.

Q: About pricing into 2025 relative to cost inflation.

A: Chris Monroe said they'll have pricing conversations post-January, Michael Bailen confirmed 3.1% pricing in Q4 and first quarter, then 2.2% rolling off.

Q: On mix contribution and menu pricing impact.

A: Chris Monroe said mix in Q3 had positive entree, soft beverage, add-ons mix, slight negative alcohol mix; Jerry Morgan said 0.9% price increase was across the board.

Q: About technology impact on labor productivity.

A: Michael Bailen said it's early but indicators are good.

Q: On unit growth philosophy.

A: Jerry Morgan said they focus on doing openings right, not targeting percentage, comfortable with 30-ish openings.

Q: On weather impact and comp sequential performance.

A: Chris Monroe said weather caused some store closures but had bounce back; Michael Bailen said comps in October had traffic acceleration.

Q: On competitive environment and comp slowdown.

A: Jerry Morgan said double down on operational excellence; Michael Bailen said comp sequential change due to pricing change.

Q: On labor hour growth into 2025.

A: Michael Bailen said labor hours depend on operator staffing, learning process ahead.

Q: On bun and butter rollout at Walmart.

A: Michael Bailen said it's early but exceeding expectations.

Q: On acquired franchise stores and third-party delivery.

A: Michael Bailen said acquired stores drive volume increase, neutral to margins; Jerry Morgan said they use third-party delivery in some stores but mostly rely on in-house.

Q: On steak consumption trends and holiday foot traffic.

A: Chris Monroe said retail discounting on beef is a risk; Michael Bailen said no significant impact from election or holiday timeframe.

Q: On franchise acquisition and capital expenditures.

A: Jerry Morgan said franchise acquisition came from regular talks with partners; Michael Bailen said capital expenditures for 2025 are relatively stable.