UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 26, 2023

OR

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to

Commission File Number 000-50972

Texas Roadhouse, Inc.

(Exact name of registrant specified in its charter)

Delaware	20-1083890
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification Number)

6040 Dutchmans Lane, Suite 200

Louisville, Kentucky 40205

(Address of principal executive offices) (Zip Code)

(502) 426-9984

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	TXRH	NASDAQ Global Select Market

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  ☒	Accelerated Filer  ☐	Non-accelerated Filer  ☐	Smaller Reporting Company  ☐
			Emerging Growth Company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐  No  ☒

The number of shares of common stock outstanding were 66,783,122 on October 25, 2023.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1 — Financial Statements (Unaudited) — Texas Roadhouse, Inc. and Subsidiaries	3
Condensed Consolidated Balance Sheets —September 26, 2023 and December 27, 2022	3
Condensed Consolidated Statements of Income — For the 13 and 39 Weeks Ended September 26, 2023 and September 27, 2022	4
Condensed Consolidated Statements of Stockholders’ Equity — For the 13 and 39 Weeks Ended September 26, 2023 and September 27, 2022	5
Condensed Consolidated Statements of Cash Flows — For the 39 Weeks Ended September 26, 2023 and September 27, 2022	7
Notes to Condensed Consolidated Financial Statements	8
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3 — Quantitative and Qualitative Disclosures About Market Risk	29
Item 4 — Controls and Procedures	30
PART II. OTHER INFORMATION
Item 1 — Legal Proceedings	31
Item 1A — Risk Factors	31
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3 — Defaults Upon Senior Securities	31
Item 4 — Mine Safety Disclosures	31
Item 5 — Other Information	32
Item 6 — Exhibits	32
Signatures	33

2

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

	September 26, 2023		December 27, 2022
Assets
Current assets:
Cash and cash equivalents	$	69,324	$	173,861
Receivables, net of allowance for doubtful accounts of $54 at September 26, 2023 and $50 at December 27, 2022		48,967		150,264
Inventories, net		36,589		38,015
Prepaid income taxes		2,823		5,097
Prepaid expenses and other current assets		23,783		29,604
Total current assets		181,486		396,841
Property and equipment, net of accumulated depreciation of $1,048,243 at September 26, 2023 and $968,036 at December 27, 2022		1,425,169		1,270,349
Operating lease right-of-use assets, net		679,065		630,258
Goodwill		169,684		148,732
Intangible assets, net of accumulated amortization of $20,217 at September 26, 2023 and $17,905 at December 27, 2022		4,195		5,607
Other assets		86,738		73,878
Total assets	$	2,546,337	$	2,525,665
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of operating lease liabilities	$	27,186	$	25,490
Accounts payable		126,219		105,560
Deferred revenue-gift cards		201,316		335,403
Accrued wages		68,013		54,544
Income taxes payable		603		434
Accrued taxes and licenses		42,478		35,264
Other accrued liabilities		95,611		95,315
Total current liabilities		561,426		652,010
Operating lease liabilities, net of current portion		730,163		677,874
Long-term debt		—		50,000
Restricted stock and other deposits		8,873		7,979
Deferred tax liabilities, net		23,393		20,979
Other liabilities		103,316		89,161
Total liabilities		1,427,171		1,498,003
Texas Roadhouse, Inc. and subsidiaries stockholders’ equity:
Preferred stock ($0.001 par value, 1,000,000 shares authorized; no shares issued or outstanding)		—		—
Common stock ($0.001 par value, 100,000,000 shares authorized, 66,783,010 and 66,973,311 shares issued and outstanding at September 26, 2023 and December 27, 2022, respectively)		67		67
Additional paid-in-capital		—		13,139
Retained earnings		1,103,889		999,432
Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity		1,103,956		1,012,638
Noncontrolling interests		15,210		15,024
Total equity		1,119,166		1,027,662
Total liabilities and equity	$	2,546,337	$	2,525,665

See accompanying notes to condensed consolidated financial statements.

3

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(in thousands, except per share data)

(unaudited)

	13 Weeks Ended				39 Weeks Ended
	September 26, 2023		September 27, 2022		September 26, 2023		September 27, 2022
Revenue:
Restaurant and other sales	$	1,115,224	$	986,999	$	3,447,192	$	2,986,028
Franchise royalties and fees		6,528		6,299		20,119		19,362
Total revenue		1,121,752		993,298		3,467,311		3,005,390
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Food and beverage		386,184		342,032		1,198,099		1,026,469
Labor		378,814		330,219		1,155,970		985,132
Rent		18,177		16,703		54,001		49,785
Other operating		169,225		146,036		507,846		442,714
Pre-opening		8,663		5,701		19,711		15,315
Depreciation and amortization		39,124		33,735		112,764		101,775
Impairment and closure, net		(2)		772		131		537
General and administrative		47,708		42,812		148,573		132,319
Total costs and expenses		1,047,893		918,010		3,197,095		2,754,046
Income from operations		73,859		75,288		270,216		251,344
Interest income (expense), net		496		(85)		2,730		(877)
Equity income from investments in unconsolidated affiliates		139		190		1,181		1,069
Income before taxes	$	74,494	$	75,393	$	274,127	$	251,536
Income tax expense		8,870		11,430		35,474		35,708
Net income including noncontrolling interests		65,624		63,963	$	238,653	$	215,828
Less: Net income attributable to noncontrolling interests		1,836		1,635		6,207		5,879
Net income attributable to Texas Roadhouse, Inc. and subsidiaries	$	63,788	$	62,328	$	232,446	$	209,949
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Basic	$	0.96	$	0.93	$	3.47	$	3.09
Diluted	$	0.95	$	0.93	$	3.46	$	3.08
Weighted average shares outstanding:
Basic		66,779		66,886		66,923		67,875
Diluted		67,014		67,159		67,179		68,140
Cash dividends declared per share	$	0.55	$	0.46	$	1.65	$	1.38

See accompanying notes to condensed consolidated financial statements.

4

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)

	For the 13 Weeks Ended September 26, 2023
								Total Texas
				Additional				Roadhouse, Inc.
		Par		Paid-in-		Retained		and		Noncontrolling
	Shares	Value		Capital		Earnings		Subsidiaries		Interests		Total
Balance, June 27, 2023	66,843,456	$	67	$	—	$	1,082,915	$	1,082,982	$	15,268	$	1,098,250
Net income	—		—		—		63,788		63,788		1,836		65,624
Distributions to noncontrolling interest holders	—		—		—		—		—		(1,894)		(1,894)
Dividends declared ($0.55 per share)	—		—		—		(36,731)		(36,731)		—		(36,731)
Shares issued under share-based compensation plans including tax effects	68,248		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(21,101)		—		(2,360)		—		(2,360)		—		(2,360)
Repurchase of shares of common stock, including excise tax	(107,593)		—		(6,162)		(6,083)		(12,245)		—		(12,245)
Share-based compensation	—		—		8,522		—		8,522		—		8,522
Balance, September 26, 2023	66,783,010	$	67	$	—	$	1,103,889	$	1,103,956	$	15,210	$	1,119,166
	For the 13 Weeks Ended September 27, 2022
								Total Texas
				Additional				Roadhouse, Inc.
		Par		Paid-in-		Retained		and		Noncontrolling
	Shares	Value		Capital		Earnings		Subsidiaries		Interests		Total
Balance, June 28, 2022	66,853,296	$	67	$	—	$	938,825	$	938,892	$	15,127	$	954,019
Net income	—		—		—		62,328		62,328		1,635		63,963
Distributions to noncontrolling interest holders	—		—		—		—		—		(1,704)		(1,704)
Dividends declared ($0.46 per share)	—		—		—		(30,781)		(30,781)		—		(30,781)
Shares issued under share-based compensation plans including tax effects	88,641		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(27,351)		—		(2,444)		—		(2,444)		—		(2,444)
Share-based compensation	—		—		9,580		—		9,580		—		9,580
Balance, September 27, 2022	66,914,586	$	67	$	7,136	$	970,372	$	977,575	$	15,058	$	992,633

See accompanying notes to condensed consolidated financial statements.

5

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)

	For the 39 Weeks Ended September 26, 2023
								Total Texas
				Additional				Roadhouse, Inc.
		Par		Paid-in-		Retained		and		Noncontrolling
	Shares	Value		Capital		Earnings		Subsidiaries		Interests		Total
Balance, December 27, 2022	66,973,311	$	67	$	13,139	$	999,432	$	1,012,638	$	15,024	$	1,027,662
Net income	—		—		—		232,446		232,446		6,207		238,653
Distributions to noncontrolling interest holders	—		—		—		—		—		(6,021)		(6,021)
Dividends declared ($1.65 per share)	—		—		—		(110,429)		(110,429)		—		(110,429)
Shares issued under share-based compensation plans including tax effects	324,415		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(100,397)		—		(10,599)		—		(10,599)		—		(10,599)
Repurchase of shares of common stock, including excise tax	(414,319)		—		(27,806)		(17,560)		(45,366)		—		(45,366)
Share-based compensation	—		—		25,266		—		25,266		—		25,266
Balance, September 26, 2023	66,783,010	$	67	$	—	$	1,103,889	$	1,103,956	$	15,210	$	1,119,166
	For the 39 Weeks Ended September 27, 2022
								Total Texas
				Additional				Roadhouse, Inc.
		Par		Paid-in-		Retained		and		Noncontrolling
	Shares	Value		Capital		Earnings		Subsidiaries		Interests		Total
Balance, December 28, 2021	69,382,418	$	69	$	114,504	$	943,551	$	1,058,124	$	15,360	$	1,073,484
Net income	—		—		—		209,949		209,949		5,879		215,828
Distributions to noncontrolling interest holders	—		—		—		—		—		(5,841)		(5,841)
Acquisition of noncontrolling interest	—		—		(1,395)		—		(1,395)		(340)		(1,735)
Dividends declared ($1.38 per share)	—		—		—		(93,328)		(93,328)		—		(93,328)
Shares issued under share-based compensation plans including tax effects	390,996		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(124,823)		—		(11,108)		—		(11,108)		—		(11,108)
Repurchase of shares of common stock	(2,734,005)		(2)		(123,057)		(89,800)		(212,859)		—		(212,859)
Share-based compensation	—		—		28,192		—		28,192		—		28,192
Balance, September 27, 2022	66,914,586	$	67	$	7,136	$	970,372	$	977,575	$	15,058	$	992,633

See accompanying notes to condensed consolidated financial statements.

6

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	39 Weeks Ended
	September 26, 2023		September 27, 2022
Cash flows from operating activities:
Net income including noncontrolling interests	$	238,653	$	215,828
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		112,764		101,775
Deferred income taxes		2,707		5,246
Loss on disposition of assets		4,315		3,635
Impairment and closure costs		41		772
Equity income from investments in unconsolidated affiliates		(1,181)		(1,069)
Distributions of income received from investments in unconsolidated affiliates		493		817
Provision for doubtful accounts		4		36
Share-based compensation expense		25,266		28,192
Changes in operating working capital, net of acquisitions:
Receivables		102,068		123,551
Inventories		1,835		(990)
Prepaid expenses and other current assets		5,821		2,831
Other assets		(12,680)		10,313
Accounts payable		14,188		1,941
Deferred revenue—gift cards		(135,251)		(119,338)
Accrued wages		13,469		21,130
Prepaid income taxes and income taxes payable		2,443		10,886
Accrued taxes and licenses		7,041		4,016
Other accrued liabilities		(10,117)		(8,916)
Operating lease right-of-use assets and lease liabilities		4,702		3,950
Other liabilities		14,158		(9,549)
Net cash provided by operating activities		390,739		395,057
Cash flows from investing activities:
Capital expenditures—property and equipment		(243,895)		(174,194)
Acquisition of franchise restaurants, net of cash acquired		(39,153)		(33,069)
Proceeds from sale of investments in unconsolidated affiliates		632		316
Proceeds from the sale of property and equipment		1,800		2,262
Proceeds from sale leaseback transactions		7,097		9,078
Net cash used in investing activities		(273,519)		(195,607)
Cash flows from financing activities:
Payments on revolving credit facility		(50,000)		(25,000)
Distributions to noncontrolling interest holders		(6,021)		(5,841)
Acquisition of noncontrolling interest		—		(1,735)
Proceeds from restricted stock and other deposits, net		485		91
Indirect repurchase of shares for minimum tax withholdings		(10,599)		(11,108)
Repurchase of shares of common stock		(45,193)		(212,859)
Dividends paid to shareholders		(110,429)		(93,328)
Net cash used in financing activities		(221,757)		(349,780)
Net decrease in cash and cash equivalents		(104,537)		(150,330)
Cash and cash equivalents—beginning of period		173,861		335,645
Cash and cash equivalents—end of period	$	69,324	$	185,315
Supplemental disclosures of cash flow information:
Interest paid, net of amounts capitalized	$	877	$	1,091
Income taxes paid	$	30,323	$	19,591
Capital expenditures included in current liabilities	$	51,556	$	32,468

See accompanying notes to condensed consolidated financial statements.

7

Texas Roadhouse, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(tabular amounts in thousands, except share and per share data)

(unaudited)

(1)  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Texas Roadhouse, Inc., our wholly-owned subsidiaries and subsidiaries in which we have a controlling interest (collectively, the "Company," "we," "our" and/or "us") as of September 26, 2023 and December 27, 2022 and for the 13 and 39 weeks ended September 26, 2023 and September 27, 2022.

The Company maintains three restaurant concepts operating as Texas Roadhouse, Bubba’s 33 and Jaggers. As of September 26, 2023, we owned and operated 623 restaurants and franchised an additional 99 restaurants in 49 states and ten foreign countries. Of the 99 franchise restaurants, there were 55 domestic restaurants and 44 international restaurants. As of September 27, 2022, we owned and operated 587 restaurants and franchised an additional 98 restaurants in 49 states and ten foreign countries. Of the 98 franchise restaurants, there were 62 domestic restaurants and 36 international restaurants.

As of September 26, 2023 and September 27, 2022, we owned a majority interest in 20 company restaurants. The operating results of these majority-owned restaurants are consolidated and the portion of income attributable to noncontrolling interests is reflected in the line item net income attributable to noncontrolling interests in our unaudited condensed consolidated statements of income.

As of September 26, 2023 and September 27, 2022, we owned a 5.0% to 10.0% equity interest in 20 and 23 domestic franchise restaurants, respectively. These unconsolidated restaurants are accounted for using the equity method. Our investments in these unconsolidated affiliates are included in other assets in our unaudited condensed consolidated balance sheets, and we record our percentage share of net income earned by these unconsolidated affiliates in our unaudited condensed consolidated statements of income under equity income from investments in unconsolidated affiliates. All significant intercompany balances and transactions for these unconsolidated restaurants as well as the entities whose accounts have been consolidated have been eliminated.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reporting of revenue and expenses during the periods to prepare these unaudited condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"). Significant items subject to such estimates and assumptions include the carrying amounts of property and equipment, goodwill, obligations related to insurance reserves, leases, legal reserves, gift card breakage and income taxes. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial statements for the periods presented. The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, except that certain information and footnotes have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. Operating results for the 13 and 39 weeks ended September 26, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 26, 2023. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 27, 2022.

Our significant interim accounting policies include the recognition of income taxes using an estimated annual effective tax rate.

8

(2) Recent Accounting Pronouncements

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting. These changes are intended to simplify the market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. We adopted this guidance during the 39 weeks ended September 26, 2023 and the adoption did not have a material impact on our unaudited condensed consolidated financial statements.

(3)   Long-term Debt

We maintain a revolving credit facility (the "credit facility") with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A. and PNC Bank, N.A. The credit facility is an unsecured, revolving credit agreement and has a borrowing capacity of up to $300.0 million with the option to increase by an additional $200.0 million subject to certain limitations, including approval by the syndicate of lenders. The credit facility has a maturity date of May 1, 2026.

On May 19, 2023, we amended the credit facility to provide for the transition from LIBOR to the Secured Overnight Financing Rate ("SOFR") as the benchmark rate for purposes of calculating interest on outstanding borrowings. Pursuant to the amendment, we are required to pay interest on outstanding borrowings at the Term SOFR, plus a fixed adjustment of 0.10% and a variable adjustment of 0.875% to 1.875% depending on our leverage ratio. At the time of transition to the Term SOFR, we had no outstanding borrowings under the credit facility.

As of September 26, 2023, we had no outstanding balance on the credit facility and had $287.7 million of availability, net of $12.3 million of outstanding letters of credit. As of December 27, 2022, we had $50.0 million outstanding on the credit facility and $233.5 million of availability, net of $16.5 million of outstanding letters of credit. The outstanding amount as of December 27, 2022 is included as long-term debt on our unaudited condensed consolidated balance sheet.

The interest rate for the credit facility as of September 26, 2023 and September 27, 2022 was 6.19% and 3.69%, respectively. ​

The lenders’ obligation to extend credit pursuant to the credit facility depends on us maintaining certain financial covenants. We were in compliance with all financial covenants as of September 26, 2023.

(4) Revenue

The following table disaggregates our revenue by major source:

	13 Weeks Ended				39 Weeks Ended
	September 26, 2023		September 27, 2022		September 26, 2023		September 27, 2022
Restaurant and other sales	$	1,115,224	$	986,999	$	3,447,192	$	2,986,028
Franchise royalties		5,832		5,559		17,896		17,029
Franchise fees		696		740		2,223		2,333
Total revenue	$	1,121,752	$	993,298	$	3,467,311	$	3,005,390

9

The following table presents a rollforward of deferred revenue-gift cards:

	13 Weeks Ended				39 Weeks Ended
	September 26, 2023		September 27, 2022		September 26, 2023		September 27, 2022
Beginning balance	$	226,130	$	208,429	$	335,403	$	300,657
Gift card activations, net		48,824		42,741		167,378		144,402
Gift card redemptions and breakage		(73,638)		(68,905)		(301,465)		(262,794)
Ending balance	$	201,316	$	182,265	$	201,316	$	182,265

We recognized restaurant sales of $26.5 million and $191.7 million for the 13 and 39 weeks ended September 26, 2023, respectively, related to amounts in deferred revenue as of December 27, 2022. We recognized restaurant sales of $30.3 million and $171.9 million for the 13 and 39 weeks ended September 27, 2022, respectively, related to amounts in deferred revenue as of December 28, 2021.

(5) Income Taxes

A reconciliation of the statutory federal income tax rate to our effective tax rate for the 13 and 39 weeks ended September 26, 2023 and September 27, 2022 is as follows:

	13 Weeks Ended				39 Weeks Ended
	September 26, 2023		September 27, 2022		September 26, 2023		September 27, 2022
Tax at statutory federal rate	21.0	%	21.0	%	21.0	%	21.0	%
State and local tax, net of federal benefit	3.7		3.8		3.7		3.8
FICA tip tax credit	(12.0)		(9.6)		(11.0)		(10.1)
Work opportunity tax credit	(1.0)		(1.0)		(1.1)		(1.3)
Stock compensation	(0.6)		(0.2)		(0.6)		—
Net income attributable to noncontrolling interests	(0.4)		(0.3)		(0.4)		(0.4)
Officers compensation	0.4		0.8		0.6		0.6
Other	0.8		0.7		0.7		0.6
Total	11.9	%	15.2	%	12.9	%