Chuy’s Holdings, Inc. Announces First Quarter 2021 Financial Results

Chuy’s Holdings, Inc. (NASDAQ:CHUY) today announced financial results for the first quarter ended March 28, 2021.

Selected monthly comparable restaurant sales and average weekly sales per restaurant for the first quarter and the second quarter to-date of 2021 are as follows:

Comparable restaurant sales for the first quarter of 2021 showed a continued sequential improvement with a decrease of 11.8% as compared to the same period in fiscal 2019. We believe that measuring our comparable restaurant sales over fiscal year 2019 is a better representation given the pandemic’s significant impact on fiscal year 2020. Despite a challenging February driven by the severe winter weather in most of the Central and Southern United States, our March and April comparable restaurant sales were at the highest level since the COVID-19 pandemic began. Off-premise sales remained strong at a rate more than double the Company’s pre-COVID-19 levels at approximately 30% during the first quarter and the second quarter of 2021 to date. As of March 28, 2021, the Company had a strong financial position with $97.3 million in cash and cash equivalents, no debt and $25.0 million of availability under its revolving credit facility. The Company believes it maintains ample financial flexibility with which to navigate the current environment.

Highlights for the first quarter ended March 28, 2021 were as follows:

• Revenue was $87.7 million compared to $94.5 million in the first quarter of 2020.
• Comparable restaurant sales decreased 3.2%.
• Net income was $6.7 million, or $0.33 per diluted share, compared to net loss of $12.4 million, or $0.75 per diluted share, in the first quarter of 2020, an increase of $19.1 million.
• Adjusted net income⁽¹⁾ was $8.5 million, or $0.42 per diluted share, compared to $1.4 million, or $0.09 per diluted share, in the first quarter of 2020.
• Restaurant-level operating profit⁽¹⁾ was $20.7 million compared to $12.8 million in the first quarter of 2020. Restaurant-level operating margin⁽¹⁾ was 23.7% compared to 13.5% in the first quarter of 2020.

(1) Adjusted net income, restaurant-level operating profit and restaurant-level operating margin are non-GAAP measures. For reconciliations of adjusted net income, restaurant-level operating profit and restaurant-level operating margin to the most directly comparable GAAP measures see the accompanying financial tables. For a discussion of why we consider adjusted net income, restaurant-level operating profit and restaurant-level operating margin useful, see “Non-GAAP Measures” below.

Steve Hislop, President and Chief Executive Officer of Chuy’s Holdings, Inc. stated, “We’re pleased with the solid start to 2021, demonstrated by continued sales recovery during the first quarter and sequential improvement in comparable restaurant sales from the fourth quarter of 2020. In fact, through our team’s hard work and dedication, we were able to improve our March and April comparable restaurant sales to under 5% of the 2019 levels, with positive trends continuing into the second quarter. In addition, our focus on cost management and operating efficiency resulted in a record quarter restaurant level operating profit, both on a dollar and margin basis. While most of our restaurants remain subject to social distancing and capacity restrictions, we are cautiously optimistic about the health of our business, and we believe that the initiatives we’ve put in place during the pandemic, coupled with our strong balance sheet and ample liquidity, have positioned our Company to succeed as we navigate the post COVID world.”

Hislop added, “Our 2021 development plan is progressing well with the opening of one new restaurant during the first quarter and one additional restaurant opening subsequent to the quarter end. We are pleased with the performance of these two recent openings thus far and we are on track to open between four to six new restaurants this year.”

First Quarter 2021 Financial Results

Revenue was $87.7 million in the first quarter of 2021 compared to $94.5 million in the first quarter of 2020. Sales in the first quarter of 2021 were negatively impacted by a decline in customer traffic as a result of COVID-19 pandemic as well as a loss of 108 operating weeks due to closures of nine restaurants during the latter part March of 2020, partially offset by $1.1 million of incremental revenue from an additional 12 operating weeks provided by new restaurants opened during and subsequent to the first quarter of 2020. For the first quarter of 2021, off-premise sales were approximately 32% of total revenue compared to approximately 18% in the same period last year.

Comparable restaurant sales decreased 3.2% for the thirteen weeks ended March 28, 2021 compared to the thirteen weeks ended March 29, 2020. The decrease in comparable restaurant sales was primarily driven by an 8.0% decrease in average weekly customers, partially offset by a 4.8% increase in average check. The comparable monthly restaurant sales during the first quarter of 2021 decreased 14.7%, decreased 26.3% and increased 33.5% for January, February and March, respectively. The comparable restaurant base consisted of 89 restaurants at the end of the first quarter of 2021.

Total restaurant operating costs as a percentage of revenue improved to 76.3% in the first quarter of 2021 from 86.5% in the first quarter of 2020 primarily driven by the following:

• Cost of sales decreased 270 basis points primarily as a result of switching to a limited menu and eliminating the complimentary buffet style chips and salsa, or “Nacho Car,” as a result of the COVID-19 pandemic as well as overall commodity deflation of 3.3%.
• Labor costs decreased 720 basis points largely as a result of a reduction in hourly employees and store management personnel due to the Company’s new operating model, which it transitioned to during the second quarter of fiscal 2020 as well as an hourly labor rate deflation at its comparable restaurants of approximately 2.9%.
• Operating expenses remained flat compared to the same period last year. Increases in delivery service charges and to-go supplies as a result of the growth in the Company’s off-premise business were offset by lower credit card fees, utility and other restaurant operating costs driven by reduced operating capacity.
• Occupancy costs decreased 20 basis points primarily as a result of the closures of nine restaurants during the latter part of March of 2020, partially offset by sales deleveraged of fixed occupancy expenses.

General and administrative expenses were $6.8 million in the first quarter of 2021 compared to $5.7 million for the same period in 2020. The increase was primarily driven by performance-based bonuses and equity compensation, partially offset by reduced travel, recruitment, and various other expenses as a result of cost saving measures in response to COVID-19.

Impairment, closed restaurant and other costs were $2.3 million ($1.8 million, net of tax or $0.09 per diluted share) during the first quarter of 2021. These costs included $1.6 million of closed restaurants costs such as rent expense, utility and insurance costs required to maintain these closed locations. During the first quarter of 2021, the Company terminated two of its closed restaurant lease agreements and recorded a $0.5 million loss on lease termination as well as a $0.3 million non-cash impairment charge related to the long-lived assets.

The Company recorded an income tax benefit of $0.7 million in the first quarter of 2021 compared to $5.5 million during the same period in fiscal 2020. The decrease in income tax benefit was driven by an increase in estimated annual net income, offset by a $1.3 million ($0.07 per diluted share) discrete tax benefit recorded during the first quarter of 2021 related to stock based compensation.

As a result of the foregoing, net income was $6.7 million, or $0.33 per diluted share, as compared to net loss of $12.4 million, or $0.75 per diluted share, in the first quarter of 2020.

Adjusted net income was $8.5 million, or $0.42 per diluted share, in the first quarter of 2021 as compared to $1.4 million, or $0.09 per diluted share, in the first quarter of 2020. Please see the reconciliation of net income to adjusted net income in the accompanying financial tables.

Development Update

During the first quarter, one new restaurant was opened in Pembroke Pines, Florida. Subsequent to the quarter end, one additional restaurant was opened in Indianapolis, Indiana.

2021 Outlook

Due to the ongoing uncertainty around the magnitude and duration of the COVID-19 pandemic, the Company is not in a position to provide full fiscal 2021 financial guidance, except the Company anticipates:

• The opening of four to six new restaurants.
• Net capital expenditures (net of tenant improvement allowances) to be approximately $15 to $25 million.
• Restaurant pre-opening expenses to be approximately $2 to $3 million.
• An effective quarterly tax rate of approximately 16% to 18% for the remaining three quarters of fiscal year 2021.

About Chuy’s

Founded in Austin, Texas in 1982, Chuy’s owns and operates full-service restaurants across 17 states serving a distinct menu of authentic, made from scratch Tex-Mex inspired dishes.

(1) Reflects the tax expense associated with the adjustments for impairment, closed restaurant and other costs the thirteen weeks March 28, 2021 and March 29, 2020. The Company has changed its method of calculating the interim income tax effect on adjustments to improve consistency and predictability of calculations at the interim period and to better align it with the year-end tax effect of these adjustments. The Company now uses its statutory rate to calculate the tax effect on adjustments as compared to calculations based on the change in the tax provision calculation after adjusting for these reconciling items. The prior period amounts have been reclassified to conform to the current period presentation for comparability.

(2) Reflects the tax benefit/expense recorded during the thirteen weeks ended March 29, 2020 associated with the CARES Act administrative correction of the depreciation recovery period for qualified improvement property.

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