Texas Roadhouse, Inc. Announces Fourth Quarter 2019 Results

Note: Fourth quarter and full year 2019 results include 14 and 53 weeks, respectively, compared to 13 and 52 weeks in the fourth quarter and full year of 2018, respectively.

Fourth quarter results

Results for the fourth quarter included the following highlights:

• Comparable restaurant sales increased 4.4% at company restaurants and 3.4% at domestic franchise restaurants;

• Restaurant margin, as a percentage of restaurant and other sales, increased 117 basis points to 17.1% as the benefit of the 53rd week, a higher average check, and labor productivity were partially offset by wage rate and commodity inflation. Restaurant margin dollars increased 28.6% to $122.9 million from $95.6 million in the prior year;

• Diluted earnings per share increased 45.4% to $0.61 from $0.42 in the prior year. Diluted earnings per share were positively impacted by $0.10 to $0.11 as a result of the 53rd week;

• 11 company restaurants, including two Bubba’s 33 restaurants, and three international franchise restaurants were opened; and

• The Company repurchased 170,187 shares of common stock for $8.9 million.

Year to date results

Results for the year-to-date period included the following highlights:

• Comparable restaurant sales increased 4.7% at company restaurants and 3.8% at domestic franchise restaurants;

• Restaurant margin, as a percentage of restaurant and other sales, decreased six basis points to 17.3%, as higher labor costs driven by wage rate and other inflation was offset by lower cost of sales due to the benefit of a higher average check. Restaurant margin dollars increased 11.8% to $474.2 million from $424.2 million in the prior year;

• Diluted earnings per share increased 11.9% to $2.46 from $2.20 in the prior year. Diluted earnings per share were positively impacted by $0.10 to $0.11 as a result of the 53rd week;

• 22 company restaurants, including three Bubba’s 33 restaurants, and nine, primarily international, franchise restaurants were opened; and

• The Company repurchased 2,625,245 shares of common stock for $139.8 million.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, “We are very pleased to end the year on a strong note, highlighted by our double digit revenue growth and improved restaurant margins in the second half of the year. Fourth quarter comparable restaurant sales grew 4.

4% at company restaurants, which represents our 40th consecutive quarter of growth. This is certainly a credit to our operators, who for 10 straight years have found ways to continue to grow sales. In addition, our healthy cash flow allowed us to increase our quarterly cash dividend to $0.

36 per share in 2020 which is our seventh straight year of increasing our dividends by double digits.”

Taylor continued, “We are off to a solid start in 2020, with comparable restaurant sales growth of 6.4% for the first seven weeks of the year. In addition, our development pipeline remains strong and we continue to target at least 30 company restaurant openings for the year.”

2020 outlook

2020 Outlook

Comparable restaurant sales at company restaurants for the first seven weeks of our first quarter of fiscal 2020 increased 6.4% compared to the prior year period.

Management reiterated the following expectations for 2020:

• Positive comparable restaurant sales growth;

• At least 30 company restaurant openings;

• Store week growth of 3.5% to 4.5%, including the negative impact of lapping the 53rd week from 2019;

• Commodity cost inflation of 1.0% to 2.0%;

• Mid-single digit growth in labor dollars per store week; and

• An income tax rate of 14.0% to 15.0%.

Management updated the following expectations for 2020:

• Total capital expenditures of $210 million to $220 million.

Cash Dividend Payment

On February 20, 2020, our Board of Directors authorized the payment of a quarterly cash dividend of $0.36 per share of common stock. This payment, which will be distributed on March 27, 2020 to shareholders of record at the close of business on March 11, 2020, represents a 20% increase from the cash dividend of $0.30 per share of common stock declared during each quarter of 2019. Since the inception of our dividend program in 2011, our cash dividend per share of common stock has increased an average of 18.2% per year.

Non-GAAP Measures

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”).

Within our press release, we make reference to restaurant margin (in dollars and as a percentage of sales). Restaurant margin represents restaurant and other sales less restaurant-level operating costs, including cost of sales, labor, rent and other operating costs. Restaurant margin should not be considered in isolation, or as an alternative, to income from operations.

This non-GAAP measure is not indicative of overall company performance and profitability in that this measure does not accrue directly to the benefit of shareholders due to the nature of the costs excluded. Restaurant margin is widely regarded as a useful metric by which to evaluate restaurant-level operating efficiency and performance. In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including pre-opening and general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance.

We also exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We also exclude impairment and closure expense as we believe this provides a clearer perspective of ongoing operating performance and a more useful comparison to prior period results. Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in our industry.

A reconciliation of income from operations to restaurant margin is included in the accompanying financial tables.

Texas Roadhouse is hosting a conference call today, February 20, 2020 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (877) 699-0953 or (647) 689-5456 for international calls. A replay of the call will be available for one week following the conference call. To access the replay, please dial (800) 585-8367 or (416) 621-4642 for international calls, and use 8963721 as the pass code. There will be a simultaneous Web cast conducted at www.texasroadhouse.com.

Texas Roadhouse is a casual dining concept that first opened in 1993 and today has grown to over 610 restaurants system-wide in 49 states and ten foreign countries. For more information, please visit the Company’s Web site at www.texasroadhouse.com.

Certain statements in this release that are not historical facts, including, without limitation, those relating to our anticipated financial performance, are forward-looking statements that involve risks and uncertainties. Such statements are based upon the current beliefs and expectations of the management of Texas Roadhouse. Actual results may vary materially from those contained in forward-looking statements based on a number of factors including, without limitation, the actual number of restaurants opening; the sales at these and our other company and franchise restaurants; changes in restaurant development or operating costs, such as food and labor; our ability to acquire franchise restaurants; our ability to integrate the franchise restaurants we acquire or other concepts we develop; our ability to continue to generate the necessary cash flows to fund our new restaurant growth, continue our share repurchase program and pay a quarterly cash dividend; strength of consumer spending; pending or future legal claims; breaches of security; conditions beyond our control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting our customers or food supplies; food safety and food-borne illness concerns; acts of war or terrorism and other factors disclosed from time to time in our filings with the U.

Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update any forward-looking statements, except as required by applicable law.