Texas Roadhouse, Inc. Q1 FY2025 earnings call

• Returned from annual Managing Partner Conference, inspired by partners' passion for operating great restaurants. - First quarter revenue over $1.4 billion, same-store sales up 3.5% with positive traffic growth. Top line trends normalized in March, April, May with March average weekly sales at all brands hitting all-time highs. - Opened eight company-owned restaurants in first quarter, including one Bubba's 33 location. On track to open ~30 company-owned restaurants this year, including up to seven Bubba’s 33 and one Jaggers. Current outlook for franchise openings includes 5 international Texas Roadhouses and 2 domestic Jaggers. - 65% of restaurants using digital kitchen, remainder to convert by end of year. Upgrade of guest management system 70% complete, rest on track to finish by end of year. - Rolled out new beverage menus for Texas Roadhouse restaurants, using regional menus tailored to geographic preferences, including mocktails and $5 all day, everyday beer and margarita offerings. - Recognized managing partners, meat cutter champion, and support center roadie of the year.

For the first quarter, Texas Roadhouse generated over $1.4 billion of revenue. Same-store sales increased 3.5%, including positive traffic growth. Weekly sales averaged $167,000 at Texas Roadhouse, $123,000 at Bubba’s 33 and $71,000 at Jaggers. All three brands delivered positive same-store sales and traffic growth during the quarter. In the first quarter, revenue growth was 9.6%, comparable sales increased 3.5% driven by 1.1% traffic growth and a 2.4% increase in average check. Average weekly sales in the first quarter were over $163,000 with to go representing approximately 13.6% of these total weekly sales.

• Increased full year commodity inflation guidance to approximately 4% based on updated beef cost expectations and tariffs, with tariffs driving ~30 basis points of the full year commodity inflation. - Maintaining 4% to 5% wage and other labor inflation guidance for the full year. - 2025 capital expenditures guidance remains unchanged at approximately $400 million. - First 5 weeks of second quarter had comparable sales up 5% and restaurants averaging weekly sales of approximately $164,000, with benefit of 1.4% menu price increase implemented at beginning of second quarter and improved mix trends.

• Unable to control broader economic landscape including potential tariffs, consumer sentiment, and other macro conditions. - Uncertainty regarding impact of tariffs on commodities, supplies, and equipment, with some impacts not felt until back half of year. - Commodity inflation outlook with potential for higher beef prices due to tightening supply and strong demand. - Labor inflation and productivity trends could impact results. - Restaurant margin performance could be affected by inflation and limited pricing.

Q: Components of tech pricing and mix improvement.

A: Had 3.1% pricing in first quarter, drops to 2.3% in second and third quarter; priced below inflation guidance. Mix improvement from entree and appetizer categories improvement.

Q: Labor and labor leverage.

A: In first quarter, labor hours grew at approximately 35% of comparable traffic growth, sixth straight quarter below 50% on that metric, turnover remains low.

Q: Restaurant margin performance.

A: First quarter had slight decline in restaurant profit dollars per week, will monitor based on inflation, pricing, and traffic assumptions.

Q: Margins and COGS dynamics.

A: COGS had 2.1% inflation in first quarter, mix shift put ~30 basis points pressure, expecting ~20 basis points pressure in second and third quarters, ~10 basis points in fourth quarter. Cadence of inflation expected similar through quarters.

Q: Comp trends and Easter/spring break impact.

A: Easter/spring break timing had about 50 basis point negative impact on quarter-to-date comps, ~20 basis point negative in second quarter and ~20 basis point positive in first quarter.

Q: Commodity inflation and beef outlook.

A: Beef supply tight, demand robust in foodservice and retail, higher prices due to tighter supply, watching heifer retention.

Q: Rent line impact.

A: Driven by acquisitions and new stores with higher rents, could slightly delever in 2025.

Q: To go sales and margins.

A: To go sales have stepped up, To-go business is incremental margin dollar occurrence, margin neutral to slightly positive.

Q: Commodity inflation and Bubba's study.

A: Commodity inflation outlook slightly higher with tariffs and beef supply, Bubba's study learned about family friendly vibe and food for all messaging.

Q: Kitchen technology operational benefits.

A: Digital kitchen and guest management system help back of house and dining room operations, but specific operational benefits not yet measurable.

Q: Labor line and store hours.

A: Labor line deleverage due to sales growth mismatch, store hours are as per current demand, considering opening earlier to capture demand.

Q: New store average unit volumes.

A: New store average unit volumes subject to geographic makeup, but not concerned as returns are expected.

Q: Franchisee acquisitions and refranchising.

A: Less than 40 domestic Texas Red House franchises left, ongoing dialogue with franchisees, no specific plan to refranchise company stores soon.

Q: Bar menu relaunch.

A: Relaunch driven by consumer feedback, margarita and beer offerings popular, mocktails gaining traction.