Investor Presentation January 2013
Texas Roadhouse, Inc Safe Harbor Statement and Reconciliation of Non-GAAP Financial Measures Under the Private Securities Litigation Reform Act of 1995 Certain statements in this presentation that are not historical facts, including, without limitation, those relating to our anticipated financial performance for the full year 2012 and beyond, are forward-looking statements that involve risks and uncertainties. Such statements are based upon the current beliefs and expectations of the management of the Company. 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 locations opening during full year 2012 and beyond, the sales at these and our other company and franchised locations, 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, strength of consumer spending, conditions beyond the Company s control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting the Company s customers or food supplies, acts of war or terrorism, and other factors disclosed from time to time in the Company's filings with the U.S. Securities and Exchange Commission. Investors should take such risks into account when making investment decisions. Stockholders 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. The Company undertakes no obligation to update any forward-looking statements. This presentation and reconciliations to non-gaap measures are available on our website, www.texasroadhouse.com.
Who is Texas Roadhouse? Casual, full service concept Partnership philosophy Made from scratch food Steak 45% of all offerings plus Ribs, Chicken & Seafood High energy service & fun atmosphere
Who is Texas Roadhouse? Legendary Food, Legendary Service Dinner-only focus Very aggressive price points $4+ million average unit volumes Guests per week ~5,100 Average check ~$15.50
We have a National presence! 390 locations in 47 states 28 planned company openings in 2013 2 locations in the Middle East 4 to 5 franchise locations in 2013 # of New Company Units 2012 25 2011 20 2010 14 2009 17 2008 29 2007 32 2006 25 6 1 1 5 12 9 1 1 15 2 3 2 4 4 55 6 3 9 13 10 10 2 1 8 11 20 22 12 12 5 10 24 3 11 14 6 14 10 1 2 3 8 3 2 4 9 2 Primarily Company Primarily Franchise Split
Our growth strategy is two-pronged. Existing Stores People Value Execution Development Domestic International New Concepts
Our business starts with PEOPLE! STOCKHOLDERS POTENTIAL INVESTORS PUBLIC GUESTS SUPPLIERS SERVICE HEROES MANAGING PARTNERS KITCHEN HEROES MANAGERS SUPPORT STAFF This philosophy has been the same since day one! MARKET PARTNERS CULTURE AND VALUES EXECUTIVE LEADERSHIP
We have a true Partnership model where we both have Skin in the Game Responsibilities Managing Partner One restaurant Deposit $25,000 Consistency Bonus Compensation 5 yr. contract 10% of Op. Income >$110,000 plus RSU s RESULTS Low Turnover / Quality Partners / Wait List for Partners Culture (Market Autonomy & Entrepreneurial Spirit)
and, this partnership model continues at the multi-unit level. Responsibilities Market Partner Up to 10-15 restaurants Deposit $50,000 Consistency Bonus Equity 5 yr. contract 5%-8% of Op. Income RSU s RESULTS Low Turnover / Quality Partners / Wait List for Partners Culture (Market Autonomy & Entrepreneurial Spirit)
Legendary Food involves high quality and great value. 6 oz. Sirloin + Salad +Baked Potato +Bread +Peanuts Made-from- Scratch Sides & Dressings Hand-cut Steaks Fresh Baked Bread
Legendary Service is all about high touch, focused execution. Dinner focus 3 table stations Limited menu changes High energy
We invest in people, food and service versus advertising. Typical Restaurant Company Texas Roadhouse National Marketing Programs 2-4% of Sales Service Food Quality Pricing National Marketing 0.3% of Sales Peanuts/Bread
We believe we have significant opportunities for TXRH. Domestic (Tx Rdhse) Potential for 700-800 units People driven Targeting new & existing markets Potential franchise acquisitions Several prototype sizes International Middle East Dedicated Resources Disciplined Approach New Concepts Fast Casual Fun Casual Low upfront capital risk
We continue to balance business & consumer pressures with our positioning. Unemployment Taxes Benefit costs Commodities Minimum and tip wage rates It is a balancing act!! Legendary Food, Legendary Service Value Position Core Values & Culture Short-term Long-term
Financial Update
What we are about financially. Supporting our business Disciplined financial allocation Returning excess capital to shareholders
Maintaining a strong balance sheet allows us to support the business. (in millions) 2008 Q3 2012 Cash $5 $84 Debt $132 $52 Net ($127) $32
While we have the cash flow, we target good growth not just growth. 32 New Stores $4.0 $4.0 29 $3.8 $4.3 $3.7 17 $4.1 20 14 $3.9 $3.8 $3.7 $3.8 $4.1 25 $3.9 2007 2008 2009 2010 2011 2012 Sales Investment $ s in millions
And, we generate very strong returns from opening new restaurants. New Restaurant Model Net Investment (a) Normalized Sales EBITDAR $ (b) $3.9 million $4.1 million $0.8 million EBITDAR Margin (b) 20% Unlevered Return (c) 21% Internal Rate of Return >15% (a) Includes rent on a basis of 10x year one rent and pre-opening of $450,000. (b) Restaurant level. (c) EBITDAR as a percentage of net investment.
Beyond taking care of and growing restaurants, we have excess capital to return to shareholders. $0.36 declared in 2012, a 12.5% increase in 2012 Plus, $0.10 special dividend in 2012 $54.6 million paid since inception $115.9 million repurchased 2008 thru Q3 2012 $100m authorization
Longer term, we expect to continue to generate more than enough cash to: Fully fund our development goals Remodel older restaurants as necessary Pay out a consistently growing dividend Repurchase at least dilution. Buy in certain franchise restaurants
Our strategy has resulted in solid historical financial growth. 2005 2011 $1.1 $123.4 $0.88 $0.5 $45.8 $0.34 Revenue ($B) Cash Flows ($M) Diluted EPS 2005 Diluted EPS includes proforma impact of stock option expense of $5.4m as disclosed in our 2006 Form 10-K. Cash flow represents net income plus net non-cash expenses.
We are targeting a mid-teens total shareholder return for the next several years. Low Double Digit Growth High Single Digit Growth +2 to +3% Low Teens Growth Consistently Growing Dividends Total Shareholder Return Mid Teens Growth
We currently have a lot of top-line momentum in our business. Comparable Sales Growth Traffic Check 2-Year SSS 8.3% 8.7% 10.6% 8.9% 7.6% 4.3% 3.1% 5.0% 4.6% 5.8% 4.4% 4.0% 5.6% 6.0% 4.5% 3.6% 1.4% -0.8% 0.4% -0.3% 0.6% -2.3% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY 2010 FY 2011 FY 2012
In addition to our sales momentum, we are doing other things to drive top-line. Opening more restaurants in 2013 Continue adding seats to restaurants Evaluating buying in some franchise restaurants
On the cost side, we will continue to balance the short and long-term. 6-7% commodity inflation likely for the second year in a row. We are doing things to help combat the pressures: Legendary Food, Legendary Service to drive traffic. Took ~2% pricing in December. Reducing non-guest interfacing costs.
Summary We remain committed to our partner/ operations focused model. We will continue to balance external pressures and our brand position. We have sufficient cash flow to internally fund development, maintain existing restaurants, AND return capital to shareholders.