Chuy’s Holdings Results

Chuy’s Holdings, Inc. Announces Second Quarter 2018 Financial Results

Chuy’s

Chuy’s Holdings, Inc. (NASDAQ:CHUY)  announced financial results for the second quarter ended July 1, 2018.

Highlights for the second quarter ended July 1, 2018 were as follows:

 

  • Revenue increased 12.6% to $106.3 million from $94.5 million in the second quarter of 2017.
  • On both a fiscal and calendar basis, comparable restaurant sales increased 1.0%.
  • Net income was $6.5 million, or $0.38 per diluted share, compared to $5.3 million, or $0.31 per diluted share, in the second quarter of 2017.
  • Restaurant-level operating profit(1) was $18.6 million compared to $18.1 million in the second quarter of 2017.
  • Three restaurants opened during the second quarter of 2018.

Steve Hislop, President and Chief Executive Officer of Chuy’s Holdings, Inc. stated “Our second quarter results included a double-digit increase in revenue and a return to positive comparable restaurant sales growth. We also continued our focus on a number of key initiatives during the quarter. Specifically, we are excited about the initiation of our alliance with Kelly Scott Madison, a media marketing agency, which we believe will help us market our unique combination of food quality, value and atmosphere to a wider audience. We continue to add tools to help us operate more efficiently and offset ongoing labor pressures. Lastly, we are currently testing online ordering, which will provide added convenience for our guests. We believe these initiatives can improve our business in the short run while also facilitating longer-term success.”

 

Hislop added, “We also added three new restaurants during the second quarter and subsequently have opened an additional restaurant during the third quarter. We are pleased with the performance of our six new openings to date, and have narrowed our range of expected openings for 2018 to nine to ten.”

 

Second Quarter 2018 Financial Results

 

Revenue increased $11.9 million, or 12.6%, to $106.3 million in the second quarter of 2018 compared to the second quarter of 2017. The increase was driven by $11.8 million in incremental revenue from an additional 147 operating weeks provided by 14 new restaurants which opened during and subsequent to the second quarter of 2017 and increased revenue at our comparable restaurants. These increases were partially offset by a decrease in our non-comparable restaurants that are not included in the incremental revenue discussed above. Revenue for non-comparable restaurants is historically lower as the restaurants transition out of the 'honeymoon' period that follows a restaurant's initial opening.

 

Due to the inclusion of a 53rd week in fiscal 2017, there is a one-week calendar shift in the comparison of the second fiscal quarter of 2018 to the second fiscal quarter of 2017. After adjusting for the timing of the 53rd week in fiscal 2017 and measuring performance on a comparable calendar basis, comparable restaurant sales increased 1.0% for the thirteen weeks ended July 1, 2018 compared to the thirteen weeks ended July 2, 2017. The increase in comparable restaurant sales was primarily driven by a 2.1% increase in average check, partially offset by a 1.1% decrease in average weekly customers. The comparable restaurant base consisted of 77 restaurants at the end of the second quarter of 2018.

 

On a fiscal basis, which does not adjust for the one-week calendar shift, as previously noted, sales for the same restaurants in the comparable restaurant base in the thirteen weeks ended July 1, 2018 increased 1.0% compared to the thirteen weeks ended June 25, 2017.

 

Total restaurant operating costs as a percentage of revenue increased to 82.5% in the second quarter of 2018 from 80.8% in the second quarter of 2017. The increase in restaurant operating costs as a percentage of revenue was primarily driven by higher labor costs due to new store labor inefficiencies and hourly labor rate inflation; an increase in marketing expenses as a result of new national-level marketing initiatives; and an increase in occupancy costs as a result of higher rental expense on certain newly opened restaurants and increases in rent on extended lease terms at some existing restaurants. These increases were partially offset by lower cost of sales as a result of favorable produce pricing and lower training expense for our new managers.

 

Total general and administrative expenses increased $0.5 million, or 11.3%, to $5.2 million for the first quarter of 2018 as compared to the same period in 2017. This increase was primarily driven by higher management salaries and benefits due to additional headcount needed to support our growth and performance bonuses.

 

Net income was $6.5 million, or $0.38 per diluted share, compared to $5.3 million, or $0.31 per diluted share, in the second quarter of 2017.

 

Development Update

 

During the second quarter, three new restaurants were opened in Lakewood, Colorado, Greenwood Village, Colorado and New Tampa, Florida. Subsequent to the end of the second quarter, one additional restaurant was opened in Kendall, Florida.

 

Share Repurchase Program

 

As of July 1, 2018, the Company had $28.4 million remaining under the current $30.0 million repurchase authorization that expires on December 31, 2019.

 

2018 Outlook

 

The Company has updated its expectation of the 2018 net income per diluted share to $1.09 to $1.13 from a previous range of $1.12 to $1.16. This compares to 2017 adjusted net income(1) per diluted share of $0.96, or $0.89 after excluding approximately $0.07 per diluted share as a result of the extra week in 2017. The net income guidance for fiscal year 2018 is based, in part, on the following annual assumptions:

 

  • Comparable restaurant sales growth of approximately 1.0% (on a 52-week fiscal basis);
  • Restaurant pre-opening expenses of $4.4 million to $4.8 million versus a previous range of $3.7 million to $5.5 million;
  • General and administrative expense of $21.3 million to $21.8 million;
  • An effective tax rate of 10% to 11% versus a previous range of 13% to 14%;
  • The opening of 9 to 10 new restaurants versus a previous range of 8 to 12 new restaurants;
  • Annual weighted average diluted shares outstanding of 17.1 million to 17.2 million shares; and
  • Net capital expenditures (net of tenant improvement allowances) of $34.0 million to $37.0 million versus a previous range of $30.0 million to $40.0 million. 

 

About Chuy’s

 

Founded in Austin, Texas in 1982, Chuy’s owns and operates 97 full-service restaurants across 19 states serving a distinct menu of authentic, made from scratch Tex-Mex inspired dishes.

 

 
Chuy’s Holdings, Inc.
Unaudited Condensed Consolidated Income Statements
(In thousands, except share and per share data)
 
  Thirteen Weeks Ended   Twenty-Six Weeks Ended

July 1, 2018

  June 25, 2017 July 1, 2018   June 25, 2017
Revenue $ 106,340 $ 94,472 $ 200,190 $ 181,376
 
Costs and expenses:
Cost of sales 26,958 24,449 50,531 46,274
Labor 37,411 31,732 70,879 61,431
Operating 14,773 13,164 28,125 25,196
Occupancy 7,472 6,324 14,569 12,445
General and administrative 5,235 4,704 10,706 9,576
Marketing 1,089 712 2,169 1,343
Restaurant pre-opening 1,310 1,722 2,731 2,824
Depreciation and amortization 4,902   4,307   9,615   8,468
Total costs and expenses 99,150   87,114   189,325   167,557
Income from operations 7,190 7,358 10,865 13,819
Interest expense, net 19   16   35   32
Income before income taxes 7,171 7,342 10,830 13,787
Income tax expense 715   2,013   1,191   3,908
Net income $ 6,456   $ 5,329   $ 9,639   $ 9,879
 
Net income per common share: Basic $ 0.38   $ 0.32   $ 0.57   $ 0.59
Net income per common share: Diluted $ 0.38   $ 0.31   $ 0.56   $ 0.58
 
Weighted-average shares outstanding: Basic 16,936,807   16,899,249   16,936,815   16,877,262
Weighted-average shares outstanding: Diluted 17,072,179   17,016,006   17,067,715   17,006,845
 

 

Reconciliation of GAAP income from operations to restaurant-level operating profit:

 

   
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 1, 2018   June 25, 2017 July 1, 2018   June 25, 2017
 
Income from operations as reported $ 7,190 $ 7,358 $ 10,865 $ 13,819
General and administrative 5,235 4,704 10,706 9,576
Restaurant pre-opening 1,310 1,722 2,731 2,824
Depreciation and amortization 4,902   4,307   9,615   8,468  
Restaurant-level operating profit $ 18,637   $ 18,091   $ 33,917   $ 34,687  
 
Restaurant-level operating margin (1) 17.5 % 19.1 % 16.9 % 19.1 %
 

 

(1)   Restaurant-level operating margin is calculated by dividing restaurant-level operating profit by revenue.
 

 

Reconciliation of GAAP net income and net income per share to adjusted results:

 

 
Year Ended

December 31,

2017

Net income as reported $ 28,956
Gain on insurance settlements (1,362 )
Income tax effect on adjustment (1) 360
Deferred tax balance adjustment (2) (11,696 )
Adjusted net income $ 16,258  
 
Adjusted net income per common share: basic $ 0.96  
Adjusted net income per common share: diluted $ 0.96  
 
Weighted-average shares outstanding: basic 16,894,986  
Weighted-average shares outstanding: diluted 17,003,233  
 

 

(1)   Reflects the income tax effect associated with the adjustments based on the Company’s effective tax rate prior to the impact of H.R.1, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).
(2) Reflects the revaluation of our net deferred tax balance using the new lower tax rate pursuant to the Tax Act.
 

 

 
Chuy’s Holdings, Inc.
Unaudited Selected Balance Sheet Data
(In thousands)
 
  July 1, 2018   December 31, 2017
Cash and cash equivalents $ 10,290 $ 8,785
Total assets 283,541 271,967
Long-term debt
Total stockholders’ equity 198,291
188,962



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