Texas Roadhouse, Inc.

Good evening and welcome to the Texas Roadhouse first quarter earnings conference call. Today's call is being recorded. All participants are now in a listen only mode. After the speaker's remarks, there will be a question and answer session. At that 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 assist you. I would now like to introduce Michael Balin, Head of Investor Relations for Texas Roadhouse. You may begin your conference.

Thank you, Brianna, and good evening. By now, you should have access to our earnings release for the first quarter ended March 28, 2023. It may also be found on our website at TexasRoadhouse.com in the investor section. I would like 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. 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 the prepared remarks, we will be available to answer your questions. In order to accommodate everyone that would like to ask a question, we kindly ask analysts to please limit yourself to one question. Now, I'd like to turn the call over to Jerry.

Thanks, Michael, and good evening to everyone. As many of you know, we just returned from our managing partner conference where we celebrated our 30 year anniversary with our operators. While we took some time to honor our past, our conference messaging was focused on our future, which will continue to be shaped by staying true to our values and our mission of legendary food and legendary service. Our operators' commitment to our mission was evident during the first quarter. which was highlighted by record guest counts in double digit increases in both same store sales and earnings. And during the first quarter, our restaurants averaged $148,000 in weekly sales, including more than $19,000 in to-go sales. We are still seeing improvement in year-over-year staffing levels thanks to our hiring, training, and retention efforts. Increased staffing levels allow us to continue our top line momentum and also focus on maintaining our high food quality standards and delivering a legendary guest experience. On the cost side of the business, inflationary pressures are mostly in line with our projections and commodities are performing as we expected. The tightening cattle supply is keeping beef prices elevated while we are experiencing some moderating inflation in other areas of our overall basket. And on the labor side, wage pressure has been persistent as it remains a competitive hiring environment. As for the first quarter development, we opened four company-owned Texas Roadhouses and two company-owned Jagger's. In addition, one international franchise restaurant opened in the Philippines. We also completed the acquisition of eight franchise restaurants located in Maryland and Delaware at the beginning of the first quarter. At this time, we continue to expect to open 25 to 30 company owned Texas Roadhouse and Bubba's 33 restaurants this year, as well as three company owned Jagger's. Our franchise partners are on track to open approximately 10 international and domestic restaurants, including two Jagger's. We also continue to invest in technology to improve both our operations and the guest experience. Roadhouse Pay, which is our pay-at-the-table system, has now been rolled out company-wide. In addition to the guest convenience during the check-and-change period, Roadhouse Pay also allows us to sell and redeem gift cards and promote sign-ups for our VIP loyalty club. Additionally, we are having great success with our digital kitchen and improving cook times, order accuracy, and other operational efficiencies. The majority of our openings this year will include a digital kitchen system, and we continue to convert some existing restaurants to the digital format. On capital allocation, our strong cash flow generation during the quarter allowed us to grow our dividend by 20%, continuing repurchasing of shares and further strengthen our capital position by repaying the remainder of our debt. Importantly, these actions were taken together with our reinvestment in the business as we spent over $100 million on capital expenditures and franchise restaurant acquisitions. Overall, we believe our ability to reinvest in the business, our strong balance sheet, and our disciplined capital allocation strategy all create a competitive advantage which will allow us to generate long-term shareholder returns. Finally, I want to give a huge shout out to Brad Apgar, our 2022 Managing Partner of the Year from College Station, Texas. We also named Rob Awe of Colorado Springs, Colorado, our first ever Bubba's 33 Managing Partner of the Year. I want to congratulate Brad and Rob, as well as all the finalists from both concepts for their accomplishments in 2022. And I also want to congratulate Daniel Rivera of Covington, Louisiana for being named our 2022 Meat Cutter Champion and Steve Zero for being named our Support Center Roadie of the Year. Our conference is a time to celebrate our successes, recognize our top performers, focus on the future, and just as importantly, have some fun. After spending a week with our operators, I can tell you that we have already all returned home energized and ready for the remainder of 2023. Now, Michael, we'll walk you through our financial update.