Texas Roadhouse, Inc. Q2 FY2025 earnings call

• Strong same-store sales growth with 5.8% increase in comparable sales, driving revenue to over $1.5 billion for the first time.
• Plan to take a menu price increase of approximately 1.7% at the beginning of the fourth quarter to offset inflationary pressures.
• Opened the 800th system-wide restaurant. During Q2, opened 4 company-owned restaurants, including 2 Bubba's 33 locations, and on track to open ~30 company-owned restaurants this year.
• Bubba's 33 has 53 locations in 16 states and aims for 200 locations, with potential double-digit openings next year. Jaggers could open up to 8 company and franchise locations next year.
• Completed acquisition of 3 franchise restaurants in Q2, with plans to acquire 3 more in Q4 and purchase remaining 5 California franchise restaurants in early 2026. Also entered into an agreement to purchase the support center.

For the second quarter of 2025, Texas Roadhouse reported revenue growth of 12.7%. Texas Roadhouse averaged approximately $172,000 in weekly sales. Bubba's 33 had average weekly sales exceeding $128,000. Jaggers delivered average weekly sales of nearly $76,000. Comparable sales increased 5.8% driven by 4% traffic growth and a 1.8% increase in average check. To-Go represented approximately 13.3% of total weekly sales.

• Full year inflation guidance updated to approximately 5% due to higher beef inflation, with labor inflation guidance lowered to approximately 4%.
• Capital expenditure guidance maintained at approximately $400 million inclusive of the support center purchase.
• Dividend expected to continue increasing annually at a measured rate, and share repurchases to offset dilution.

• Commodity inflation, particularly beef, poses a risk to costs. Supply chain issues and consumer demand for beef could drive up prices.
• Labor market dynamics and potential challenges in staffing restaurants, though operators are doing well in staffing.
• Uncertainties in the beef cycle and its impact on margin profiles.

Q: Sara Senatore asked about inflation dynamics, especially beef inflation.

A: Michael Bailen said retail demand for beef is resilient, supply from beef suppliers is tight, leading to higher costs in June, with 80% of beef locked for Q3 and 50% for Q4.

Q: David Palmer asked about mix effect and labor leverage.

A: Michael Bailen said negative mix pressure is from alcohol category, positive entree mix; labor leverage is helped by traffic growth and lower turnover in restaurants.

Q: David Tarantino asked about Q3/Q4 inflation outlook and Bubba's growth.

A: Michael Bailen said highest beef inflation pressure in Q3, expected to come down in Q4; Jerry Morgan said Bubba's pipeline is solid with potential double-digit openings next year, possibly ticking up the total unit growth from ~30.

Q: Lauren Silberman asked about comp monthly cadence and regional differences.

A: Michael Bailen said April had a 70 basis point negative impact from Easter timing, but overall comps strong 7 days a week across regions.

Q: Dennis Geiger asked about restaurant margins in back half.

A: Michael Bailen said other op ex could have similar leverage, labor line may have flat to slight leverage with traffic growth.

Q: Kelly Merrill asked about commodity inflation drivers and labor efficiency.

A: Michael Bailen said beef is the main driver of commodity inflation; Keith Humpich said no significant impact from tariffs on construction yet. Michael Bailen said operators are always looking to run efficient restaurants but no dramatic labor levers.

Q: Jim Salera asked about Bubba's 33 scaling and regional plan.

A: Jerry Morgan said focusing on multiunit operators in turf areas, continuing to grow with stable leadership and strong execution.

Q: Anisha Datt asked about value mix and emphasis.

A: Jerry Morgan said value built into menu with country dinners, multiple beef cuts, early dine feature, and $5 beverage mix menu.

Q: Peter Saleh asked about beef pricing and construction costs.

A: Michael Bailen said consumers willing to pay for beef despite retail pricing; Keith Humpich said no impact from tariffs on construction yet.

Q: Jeff Farmer asked about Roadhouse mobile app.

A: Jerry Morgan said mobile app widely used, upgraded for easier ordering, and operators executing well at pickup windows.

Q: Andrew Strelzik asked about commodity inflation offsets and labor efficiency.

A: Michael Bailen said beef is main driver, other proteins slightly offset, but mostly beef; Keith Humpich said no dramatic labor levers.

Q: Jeff Farmer asked about Roadhouse mobile app users and leverage.

A: Jerry Morgan said mobile app widely used, improving order completion and pickup experience.

Q: Jim Sanderson asked about corporate store margin and unit mix.

A: Michael Bailen said Bubba's planned as company development, Roadhouse and Bubba's mostly company growth, Jaggers mix of company and franchise, international franchise; Bubba's expected to have margins similar to Texas Roadhouse over time.

Q: Gregory Francfort asked about margin profile.

A: Jerry Morgan said believe in 17-18% margin range, but need to control costs and balance for fiscal responsibility.

Q: Jake Bartlett asked about off-premise sales drivers and sustainability.

A: Jerry Morgan said combination of app, easy pickup, and operators executing well; believes growth is sustainable but will monitor.

Q: Todd Brooks asked about off-premise mix and KDS impact.

A: Jerry Morgan said KDS helps with efficiency, digital kitchen rollout improving off-premise capacity; Michael Bailen said some stores have higher off-premise mix as examples.