Texas Roadhouse, Inc. Q4 FY2024 earnings call

• 2024 Highlights: Revenue near $5.4B, average unit volume over $8M for first time, 750th systemwide restaurant, first international Jaggers, named brand icon, 20-year public company anniversary. Community initiatives: partnering with Homes for Our Troops, raising over $925k for American Tinnitus Association, free meals for over 1M veterans. Development: 31 company-owned restaurants opened, 11 international Texas Roadhouse and 3 Jaggers by franchisees. • 2025 Plans: Expect ~30 company restaurant openings, 7 international Texas Roadhouse and 3 domestic Jaggers franchise openings. 1.4% menu price increase in second quarter. Technology initiatives: complete digital kitchen conversions by end of 2025, upgrade guest management system. • Fourth Quarter Results: Revenue growth 23.5%, restaurant margin dollar increase 37.3% to $243M, diluted EPS up 60.1% to $1.73.

For the fourth quarter of 2024, Texas Roadhouse reported revenue growth of 23.5%, primarily driven by a 6.6% increase in comparable average unit volume and 13.7% store week growth. Average weekly sales in the fourth quarter were $154,000 with to-go representing $20,000 or 13% of the total weekly sales. Comparable sales increased 7.7% in the fourth quarter, driven by 4.9% traffic growth and a 2.8% increase in average check. Full year weekly sales averaged 159,000 at Texas Roadhouse, 119,000 at Bubba's 33 and 71,000 at Jaggers. Revenue grew to nearly $5.4 billion, and average unit volume exceeded $8 million for the first time in history, with same-store sales increasing 8.5% including 4.4% traffic growth.

• Wage and other labor inflation: 4%-5%, driven by state-mandated wage increases, franchise acquisition, higher benefits. • Commodity inflation: Updated to 3%-4% for 2025, tighter cattle supply in back half. • Capital expenditures: ~$400M unchanged, including $78M for franchise acquisition. • Dividend: 11% increase, $500M share repurchase program authorized.

• Weather and calendar shifts impacting sales. • Commodity supply issues affecting cost of goods. • Labor inflation pressures. • External factors like flu, COVID, RSV affecting foot traffic.

Q: David Tarantino with Baird asked about quarter-to-date trend in Q1, including weather issues and confidence in returning to positive traffic growth.

A: Jerry and Chris discussed weather impact, calendar shifts, and underlying business strength, noting Valentine's Day week performance and confidence in fundamentals.

Q: David Palmer of Evercore ISI asked about inflation estimates, specifically beef cost visibility and margin trends.

A: Michael Bailen said majority of increase driven by beef, ~40% of basket locked, lowest inflation in Q1, consistent outlook later in year.

Q: Brian Harbour of Morgan Stanley asked about margin drivers, OpEx favorability, and labor hours to traffic.

A: Michael Bailen noted potential OpEx leverage, early labor hours to traffic indications, and 4%-5% labor inflation with more pressure in front half.

Q: Sara Senatore with Bank of America asked about comp components, mocktails impact, and brand maturity curves.

A: Michael Bailen discussed traffic, check, mix, mocktails being early contributor, and similar maturity curves for Texas Roadhouse and Bubba's 33.

Q: Jon Tower of Citigroup asked about clarification on company-owned development and marketing strategies.

A: Jerry Morgan and Michael Bailen discussed development focus, local marketing, early dine, Wild West Wednesday, and $5 drink menu.

Q: Brian Bittner of Oppenheimer asked about pricing run rate and cost of sales leverage.

A: Chris Monroe and Michael Bailen discussed pricing roll-off, 1.4% increase, and potential cost of sales de-leverage.

Q: Jake Bartlett of Truist Securities asked about company-owned development acceleration.

A: Jerry Morgan discussed cautious approach to development, focus on quality openings, and 30-ish number as target.

Q: Jeffrey Bernstein with Barclays asked about new units, ultimate opportunity, and build costs.

A: Jerry Morgan and Michael Bailen discussed 900 target for Texas Roadhouse, average build cost ~$8.5M to $8.6M, mid-teen IRR.

Q: Gregory Francfort with Guggenheim Partners asked about wage inflation.

A: Michael Bailen discussed wage inflation at 4.6% in 2024, 4%-5% guidance for 2025, benefits costs factored in.

Q: Dennis Geiger with UBS asked about traffic outperformance gap to industry.

A: Jerry Morgan discussed value-based offering, competitive approach, and focus on consumer value.

Q: Lauren Silberman with Deutsche Bank asked about quarter-to-date comp step down and commodity inflation outlook.

A: Chris Monroe and Michael Bailen discussed winter storms, external factors, and cattle cycle impact on commodities.

Q: Andy Barish with Jefferies asked about guest management update and to-go business.

A: Jerry Morgan and Michael Bailen discussed AGM 2.0, digital kitchen, to-go growth, and guest appreciation.

Q: Jim Salera with Stephens asked about traffic drivers and new guest pipeline.

A: Michael Bailen discussed existing guest frequency, local marketing, and focus on guest experience.

Q: Logan Reich with RBC Capital Markets asked about consumer changes and value proposition vs grocery.

A: Chris Monroe and Michael Bailen discussed no major behavior changes, mindful of grocery competition, and value focus.

Q: Peter Saleh with BTIG asked about grocery promotions, tariffs, and share buyback.

A: Chris Monroe and Jerry Morgan discussed grocery promotions impact, tariff awareness, and balanced share repurchase approach.

Q: Christine Cho with Goldman Sachs asked about brand portfolio synergies.

A: Jerry Morgan discussed brand support, people and operation focus, and growth strategy for each brand.

Q: Jim Sanderson with Northcoast Research asked about pricing philosophy and remodel schedules.

A: Jerry Morgan and Chris Monroe discussed conservative pricing approach, remodel schedule based on operator input, and store freshness focus.

Q: Rahul Krotthapalli with JPMorgan asked about bump outs, remodels, and asset age.

A: Michael Bailen and Chris Monroe discussed bump out capacity, new store footers for bump outs, and remodel investment based on operator input