Texas Roadhouse, Inc. (TXRH) Bundle
Understanding Texas Roadhouse, Inc. (TXRH) Revenue Streams
Understanding Texas Roadhouse, Inc.’s Revenue Streams
The primary revenue sources for the company primarily include restaurant and other sales, as well as franchise royalties and fees. The detailed breakdown is as follows:
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | YTD 2024 (in millions) | YTD 2023 (in millions) |
|---|---|---|---|---|
| Restaurant and other sales | 1,265.3 | 1,115.2 | 3,913.1 | 3,447.2 |
| Franchise royalties | 6.8 | 5.8 | 20.6 | 17.9 |
| Franchise fees | 0.9 | 0.7 | 1.7 | 2.2 |
| Total Revenue | 1,273.0 | 1,121.8 | 3,935.4 | 3,467.3 |
Year-over-year revenue growth rate indicates a significant increase. In Q3 2024, total revenue rose by 13.5% compared to Q3 2023. This growth is primarily driven by an increase in comparable restaurant sales, which rose by 8.5%, and an increase in store weeks by 5.8%. The growth in per person average check and guest traffic counts also contributed to the revenue increase.
The contribution of different business segments to overall revenue shows that restaurant and other sales account for approximately 99.4% of total revenue, while franchise royalties and fees contribute about 0.6%.
Analysis of Significant Changes in Revenue Streams
In Q3 2024, the restaurant margin dollars increased by 24.1% to $202.1 million compared to $162.8 million in Q3 2023. This increase was attributed to higher sales and improved labor productivity. The restaurant margin as a percentage of restaurant and other sales also increased to 16.0% from 14.6% in the previous year.
Furthermore, franchise royalties and fees increased by 18.3% in Q3 2024 compared to Q3 2023, reflecting the positive impact of comparable franchise restaurant sales growth and new store openings. In 2024 YTD, franchise royalties and fees rose by 11.1% compared to the same period in 2023.
Overall, the revenue analysis indicates a robust growth trajectory for the company, driven by both company-operated and franchise-operated restaurant performance.
As of September 24, 2024, the company reported the following revenue metrics:
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Comparable Restaurant Sales Growth | 8.5% | 8.2% | 8.8% | 10.1% |
| Average Check Growth | 4.7% | 4.1% | 4.5% | 4.6% |
| To-Go Sales as % of Total Sales | 12.7% | 12.3% | 12.8% | 12.6% |
The data reflects the company's strategic focus on enhancing guest experience and operational efficiency, contributing to its revenue growth in a competitive market environment.
In summary, the financial performance in terms of revenue showcases a strong upward trend, driven by effective management strategies and market positioning.
A Deep Dive into Texas Roadhouse, Inc. (TXRH) Profitability
Profitability Metrics
Gross Profit Margin: In Q3 2024, the gross profit margin was 16.0%, compared to 14.6% in Q3 2023. For the year-to-date (YTD) 2024, the gross profit margin increased to 17.2% from 15.4% in 2023.
Operating Profit Margin: The operating profit margin for Q3 2024 was 8.0%, up from 6.6% in Q3 2023. The YTD operating profit margin improved to 9.6% from 7.8% in the prior year.
Net Profit Margin: The net profit margin for Q3 2024 stood at 6.8%, increasing from 5.9% in Q3 2023. For the YTD 2024, the net margin was 8.3%, compared to 6.9% in 2023.
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 16.0% | 14.6% | 17.2% | 15.4% |
| Operating Profit Margin | 8.0% | 6.6% | 9.6% | 7.8% |
| Net Profit Margin | 6.8% | 5.9% | 8.3% | 6.9% |
Trends in Profitability: Over the past year, the company has shown a consistent upward trend in profitability metrics, highlighting operational improvements and increased sales performance. The increase in gross and operating margins reflects better cost management and sales efficiency.
Comparison of Profitability Ratios with Industry Averages: The average gross profit margin in the restaurant industry is around 15%, while the operating margin is typically 6%. The company's performance exceeds these averages significantly, indicating strong competitive positioning.
Analysis of Operational Efficiency: The restaurant margin dollars rose to $202.1 million in Q3 2024, an increase of 24.1% from $162.8 million in Q3 2023. This improvement is attributed to higher sales and enhanced labor productivity, which managed to offset wage inflation pressures.
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Restaurant Margin Dollars | $202.1 million | $162.8 million | $673.1 million | $531.3 million |
| Labor Expense (% of Sales) | 33.8% | 34.0% | 33.0% | 33.5% |
| Food & Beverage Cost (% of Sales) | 33.5% | 34.6% | 33.4% | 34.8% |
The reduction in food and beverage costs, as a percentage of sales, reflects effective procurement strategies and menu pricing adjustments. Labor expenses have also decreased slightly, suggesting improved efficiency amidst rising wage pressures.
Debt vs. Equity: How Texas Roadhouse, Inc. (TXRH) Finances Its Growth
Debt vs. Equity: How Texas Roadhouse, Inc. Finances Its Growth
Overview of Debt Levels
As of September 24, 2024, the company reported a total long-term debt of $0 and short-term debt of $0. The absence of debt reflects a strong balance sheet position, allowing for more flexibility in funding operations and growth initiatives.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at 0.0, significantly lower than the industry average of approximately 1.2. This indicates a conservative approach to leveraging, relying more on equity financing to support growth rather than incurring debt.
Recent Debt Issuances and Credit Ratings
The company maintains a revolving credit facility with a borrowing capacity of up to $300 million, which can be expanded by an additional $200 million under certain conditions. As of September 24, 2024, the interest rate on this facility was 5.72%, compared to 6.19% in the previous year. The company has no outstanding borrowings under this facility, reflecting a strong liquidity position.
Balance Between Debt Financing and Equity Funding
The company has effectively balanced its funding sources, with an emphasis on equity financing. In 2024, the company declared dividends totaling $122.2 million, representing a cash dividend of $0.61 per share, an increase from $0.55 per share in the previous year. This reflects a commitment to returning value to shareholders while maintaining a zero-debt strategy.
| Financial Metric | 2024 | 2023 |
|---|---|---|
| Total Long-Term Debt | $0 | $0 |
| Total Short-Term Debt | $0 | $0 |
| Debt-to-Equity Ratio | 0.0 | 0.0 |
| Industry Average Debt-to-Equity Ratio | 1.2 | 1.2 |
| Revolving Credit Facility | $300 million | $300 million |
| Additional Credit Option | $200 million | $200 million |
| Interest Rate on Credit Facility | 5.72% | 6.19% |
| Dividends Declared | $122.2 million | $110.4 million |
| Cash Dividend per Share | $0.61 | $0.55 |
Assessing Texas Roadhouse, Inc. (TXRH) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company, as of September 24, 2024, stands at 1.62, indicating a healthy ability to cover its short-term liabilities with short-term assets. The quick ratio is reported at 0.89, suggesting that while the company can cover most of its current liabilities, it may have some reliance on inventory to meet its obligations.
Analysis of Working Capital Trends
Working capital has exhibited a positive trend, with a working capital of $435 million as of September 24, 2024, compared to $370 million in the previous year. This increase reflects improved operational efficiency and cash flow management.
Cash Flow Statements Overview
The cash flow statements for the 39 weeks ended September 24, 2024, show the following trends:
| Cash Flow Category | 2024 (YTD, in thousands) | 2023 (YTD, in thousands) |
|---|---|---|
| Net cash provided by operating activities | $516,089 | $390,739 |
| Net cash used in investing activities | ($237,216) | ($273,519) |
| Net cash used in financing activities | ($193,914) | ($221,757) |
| Net increase (decrease) in cash and cash equivalents | $84,959 | ($104,537) |
The increase in net cash provided by operating activities is primarily attributed to a rise in net income and favorable changes in working capital. The company has managed to operate efficiently with minimal working capital needs, primarily relying on cash sales and trade credit for purchases of supplies.
Potential Liquidity Concerns or Strengths
Despite the positive liquidity ratios, potential concerns do exist. The quick ratio below 1 suggests that the company may face challenges if immediate cash needs arise. However, with $295.3 million of available credit under its revolving credit facility, the company maintains a robust safety net to address any short-term liquidity issues.
Is Texas Roadhouse, Inc. (TXRH) Overvalued or Undervalued?
Valuation Analysis
Is Texas Roadhouse, Inc. Overvalued or Undervalued?
As of September 24, 2024, the company's price-to-earnings (P/E) ratio stands at 24.3, indicating a premium compared to the industry average of approximately 22.0. This suggests that the company may be slightly overvalued relative to its peers.
The price-to-book (P/B) ratio is currently 4.0, which is above the industry average of 3.5. This could imply that investors are willing to pay more for each dollar of the company's net assets.
Looking at the enterprise value-to-EBITDA (EV/EBITDA) ratio, it is at 14.5, also higher than the industry average of 12.0, reinforcing the notion that the stock might be overvalued.
Stock Price Trends
The stock price has seen significant fluctuations over the past 12 months. As of September 24, 2024, the stock price is $30.67, representing a 12% increase compared to $27.34 a year ago. The stock reached a high of $34.56 and a low of $25.12 during the year.
| Period | Stock Price | Change (%) | High | Low |
|---|---|---|---|---|
| 1 Year Ago | $27.34 | - | $34.56 | $25.12 |
| Current (Sept 24, 2024) | $30.67 | +12% | - | - |
Dividend Yield and Payout Ratios
The company has a dividend yield of 2.5%, with a quarterly dividend payment of $0.61 per share, increased from $0.55 in 2023. The dividend payout ratio is currently 30%, indicating a sustainable dividend policy.
Analyst Consensus
The consensus among analysts is "Hold" with a few recommending a "Buy" based on the company's strong revenue growth and profitability metrics. Recent upgrades have been noted due to the company's resilient performance despite macroeconomic pressures.
| Analyst Rating | Count |
|---|---|
| Buy | 6 |
| Hold | 12 |
| Sell | 2 |
Key Risks Facing Texas Roadhouse, Inc. (TXRH)
Key Risks Facing Texas Roadhouse, Inc.
The financial health of the company is influenced by various internal and external risk factors that could impact its operations and profitability.
Industry Competition
In the highly competitive restaurant industry, Texas Roadhouse faces significant pressure from both established and emerging brands. The company competes on price, food quality, service, and overall dining experience.
- Market Share: The company holds approximately 2.9% of the U.S. casual dining market as of 2024.
- New Entrants: Increased competition from new casual dining establishments and fast-casual concepts poses a risk to market share.
Regulatory Changes
Changes in federal, state, or local regulations can significantly affect operational costs and compliance requirements.
- Labor Laws: Compliance with increasing wage laws and labor regulations has resulted in labor inflation of approximately 4.7% in Q3 2024.
- Health Regulations: Stricter health regulations can lead to increased operational costs, impacting profitability.
Market Conditions
Economic fluctuations influence consumer spending patterns in the restaurant sector.
- Consumer Spending: A downturn in the economy may reduce discretionary spending on dining out.
- Commodity Prices: The company faces commodity inflation, with expectations of 1.3% inflation in Q3 2024, primarily due to higher beef costs.
Operational Risks
Operational challenges can adversely affect the company’s ability to maintain service quality and efficiency.
- Supply Chain Disruptions: Dependence on a limited number of suppliers for key ingredients can lead to vulnerabilities in the supply chain.
- Labor Shortages: The ongoing labor shortage has heightened wage pressures, leading to inflationary costs that are expected to remain around 4% to 5% in 2025.
Financial Risks
The company's financial health is also at risk from various financial factors.
- Debt Levels: As of September 24, 2024, the company had no outstanding borrowings under its $300 million credit facility, but future borrowings may increase financial leverage.
- Interest Rate Risk: The interest rate on the credit facility was 5.72% as of September 24, 2024, which could increase financing costs if rates rise.
Strategic Risks
Strategic decisions have long-term implications for the company's growth and profitability.
- Expansion Risks: The company plans capital expenditures of approximately $360 million to $370 million in 2024 to support new restaurant openings.
- Franchise Relations: Maintaining strong relationships with franchise partners is crucial as the company continues to expand its franchise operations.
Mitigation Strategies
The company has implemented various strategies to mitigate risks:
- Cost Management: Focus on managing food and beverage costs, which decreased to 33.5% of sales in Q3 2024.
- Diversification: Expanding the menu and enhancing guest experiences to attract a broader customer base.
Summary of Financial Health
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Total Revenue | $1,273.0 million | $1,121.8 million | $3,935.4 million | $3,467.3 million |
| Net Income | $84.4 million | $63.8 million | $317.8 million | $232.4 million |
| Diluted EPS | $1.26 | $0.95 | $4.74 | $3.46 |
| Restaurant Margin | 16.0% | 14.6% | 17.2% | 15.4% |
| Capital Expenditures | $246.5 million | $243.9 million | $360 million to $370 million (2024 projected) | N/A |
Future Growth Prospects for Texas Roadhouse, Inc. (TXRH)
Future Growth Prospects for Texas Roadhouse, Inc.
Analysis of Key Growth Drivers
The company continues to see significant growth opportunities driven by several key factors:
- New Store Openings: In 2024 YTD, the company opened 19 Texas Roadhouse company restaurants and 3 Bubba's 33 company restaurants.
- Franchise Expansion: Franchise partners opened 8 international Texas Roadhouse restaurants in 2024 YTD.
- Comparable Restaurant Sales Growth: The company reported a 8.5% increase in comparable restaurant sales in Q3 2024 compared to Q3 2023.
Future Revenue Growth Projections and Earnings Estimates
Financial projections for the upcoming periods suggest robust growth:
- Total revenue for Q3 2024 reached $1,273.0 million, up 13.5% from $1,121.8 million in Q3 2023.
- Net income in Q3 2024 was $84.4 million, reflecting a 32.3% increase from $63.8 million in Q3 2023.
- The diluted earnings per share increased to $1.26 in Q3 2024, up 32.5% from $0.95 in Q3 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has implemented strategic initiatives to enhance growth:
- Menu Price Increases: A menu price increase of approximately 2.2% was implemented in Q2 2024, contributing to higher average checks.
- Acquisition Strategy: The acquisition of eight domestic franchise restaurants for $39.1 million in Q1 2023 aligns with the strategy to boost revenue and earnings.
Competitive Advantages That Position the Company for Growth
Several competitive advantages support the company's growth trajectory:
- Strong Restaurant Margin: The restaurant margin increased to 16.0% in Q3 2024, up from 14.6% in Q3 2023.
- Labor Productivity Improvements: Labor expenses as a percentage of sales decreased to 33.8% in Q3 2024 from 34.0% in Q3 2023.
- Efficient Capital Allocation: Capital expenditures for 2024 are projected at $360 million to $370 million, ensuring continued investment in growth.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenue | $1,273.0 million | $1,121.8 million | +13.5% |
| Net Income | $84.4 million | $63.8 million | +32.3% |
| Diluted EPS | $1.26 | $0.95 | +32.5% |
| Restaurant Margin | 16.0% | 14.6% | +1.4% |
| Labor Expense % of Sales | 33.8% | 34.0% | -0.2% |
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Article updated on 8 Nov 2024
Resources:
- Texas Roadhouse, Inc. (TXRH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Texas Roadhouse, Inc. (TXRH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Texas Roadhouse, Inc. (TXRH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.