Texas Roadhouse, Inc.

Good evening and welcome to the Texas Roadhouse Second Quarter Earnings Conference Call. Today's call is being recorded. All participants are now in an listen-only mode. After the speaker's remarks, there will be a question-and-answer session. At the time, if you would like to ask a question, please press star then the number one on your telephone keypad. Should anyone need assistance at any time during the conference, please press star zero. and an operator will come back to assist you. I will now turn the call. I would now like to introduce Tanya Robinson, the Chief Financial Officer of Texas Roadhouse. You may begin your conference.

Thank you, Maria, and good evening, everyone. By now, you should have access to our earnings release for the second quarter ended June 29th, 2021. It may also be found on our website at TexasRoadhouse.com in the Investors section. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. including factors related to the COVID-19 pandemic. In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse. Following our remarks, we will open the call for questions. Now, I'd like to turn the call over to Jerry.

Thanks, Tanya. We are very pleased with our results for the second quarter of 2021, hitting historical highs on both sales and net income. For our June period, average guest counts in our dining room were comparable to 2019 levels with the majority of the state-mandated capacity restrictions lifted. And at the same time, we were still serving approximately two and a half times the number of to-go guests that we did in 2019. We have worked hard to support our operators since the start of the pandemic, and much of our success is due to their hard work and creativity. The dedication and passion that our restaurant management teams have shown during this time has strengthened our brand and expanded our base of loyal guests. Our top line focus, along with strong consumer demand, have enabled us to grow our sales volume. With these higher volumes come challenges that may be magnified in the current business environment. Our top operational focus is supporting our managing partners and their management teams as they continue to hire and train new roadies. Most of our restaurants have made great strides in their staffing levels, while others have faced challenges reaching and holding their desired staffing levels on a consistent basis. Despite the challenges, we have not wavered on our expectations of delivering legendary food and legendary service to our guests. We also continue to exceed our initial 2021 expectations for commodity usage. This has required us to buy more product on the open market and outside the cost parameters of our original contracts. As a result, we are seeing our costs for most commodities, in particular beef, trending higher than anticipated, leading to an increased level of food inflation during the second quarter and in the back half of the year. Based on our updated outlook, we are raising our commodity inflation expectation to approximately 7% for the full year of 2021. Despite the cost pressures we are facing, we will continue to run our restaurants with a steady approach and a long-term focus. We will have our normal internal conversations with operators regarding menu pricing several weeks from now with the target of implementing any price increase in late October. We are also seeing some inflationary pressure on development costs for new store openings. However, strong cash flow at the store level leave us confident that we will meet our return on investment expectations and continue to fund our growth internally. During the second quarter, we opened eight company restaurants, including two Bubba's 33 locations. Our current expectation is that by end of year, we will open 26 to 29 company restaurants, including five Bubba's and one Jagger's. As we set our sights and attention on the back half of 2021 and continue to prepare for 2022 and beyond, I want to thank all of our managing partners, our managers, and our roadies for their efforts. As your partner, I want you to know how much we appreciate you and that together we will continue to make Texas Roadhouse bigger, faster, stronger. Let's go, Roadhouse! Now, Tanya will provide a financial update.