The Cheesecake Factory Reports Results for Second Quarter of Fiscal 2023 and Provides Business Update
Total revenues were $866.2 million in the second quarter of fiscal 2023 compared to $832.6 million in the second quarter of fiscal 2022. Net income and diluted net income per share were $42.7 million and $0.87, respectively, in the second quarter of fiscal 2023.
The Cheesecake Factory Incorporated (NASDAQ: CAKE) yesterday reported financial results for the second quarter of fiscal 2023, which ended on July 4, 2023.
Total revenues were $866.2 million in the second quarter of fiscal 2023 compared to $832.6 million in the second quarter of fiscal 2022. Net income and diluted net income per share were $42.7 million and $0.87, respectively, in the second quarter of fiscal 2023.
The Company recorded a pre-tax net expense of $0.6 million related to Fox Restaurant Concepts (“FRC”) acquisition-related expenses and impairment of assets and lease termination income. Excluding the after-tax impact of these items, adjusted net income and adjusted net income per share for the second quarter of fiscal 2023 were $43.1 million and $0.88, respectively. Please see the Company’s reconciliation of non-GAAP financial measures at the end of this press release.
Comparable restaurant sales at The Cheesecake Factory restaurants increased 1.5% year-over-year in the second quarter of fiscal 2023 and increased 14.1% relative to the second quarter of fiscal 2019, on an operating week basis.
“I am pleased to report our second quarter results marked the third consecutive quarter of sequential profit margin expansion, finishing above our expectations, reflecting continued progress against our stated goal of recapturing our margins,” said David Overton, Chairman and Chief Executive Officer. “We delivered another quarter of comparable sales growth across our portfolio of concepts, with comparable sales at The Cheesecake Factory restaurants continuing to outpace the industry relative to 2019. Our experienced operators drove solid operational execution within our restaurants to deliver year-over-year improvements in labor productivity and hourly staff and manager retention.”
“We opened three new restaurants during the second quarter, including two in the Miami area which opened to impressive demand, underscoring the strength of the consumer demand for our concepts and the unique dining experiences we provide for our guests. We remain intently focused on accelerating our unit growth and achieving our long-term unit growth objectives, despite ongoing construction and permitting challenges.”
Development
During the second quarter of fiscal 2023, the Company opened a Cheesecake Factory and a Henry in the Miami area and a Doughbird in Tucson, AZ. While all of the sites in the Company’s pipeline remain active, the Company continues to experience some delays in opening dates due to construction challenges and permit approval delays. As a result, the Company now expects to open as many as 20 new restaurants in fiscal 2023, including as many as six Cheesecake Factory restaurants, five North Italia restaurants, and as many as nine FRC restaurants, including three Flower Child locations.
In addition, in fiscal 2023 the Company expects two to three Cheesecake Factory restaurants to open internationally under licensing agreements.
Liquidity and Capital Allocation
As of July 4, 2023, the Company had total available liquidity of $330.1 million, including a cash balance of $91.6 million and availability on its revolving credit facility of $238.5 million. Total principal amount of debt outstanding was $475 million, including $345 million in principal amount of 0.375% convertible senior notes due 2026 and $130 million in principal amount drawn on the Company’s revolving credit facility.
The Company repurchased approximately 280,400 shares of its stock at a cost of $9.3 million in the second quarter of fiscal 2023. In addition, the Company’s Board of Directors has declared a quarterly dividend of $0.27 per share to be paid on August 29, 2023 to shareholders of record at the close of business on August 16, 2023.
| The Cheesecake Factory Incorporated | ||||||||||||||||||||||||||||
| Condensed Consolidated Financial Statements | ||||||||||||||||||||||||||||
| (unaudited; in thousands, except per share and statistical data) | ||||||||||||||||||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | 26 Weeks Ended | 26 Weeks Ended | |||||||||||||||||||||||||
| Consolidated Statements of Income | July 4, 2023 | June 28, 2022 | July 4, 2023 | June 28, 2022 | ||||||||||||||||||||||||
| Amount | Percent of |
| Amount | Percent of |
| Amount | Percent of |
| Amount | Percent of | ||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Revenues | $ | 866,170 |
| 100.0 | % | $ | 832,643 |
| 100.0 | % | $ | 1,732,284 |
| 100.0 | % | $ | 1,626,353 |
| 100.0 | % | ||||||||
| Costs and expenses: | ||||||||||||||||||||||||||||
| Food and beverage cost |
| 201,094 |
| 23.2 | % |
| 204,182 |
| 24.5 | % |
| 407,318 |
| 23.5 | % |
| 392,683 |
| 24.1 | % | ||||||||
| Labor expenses |
| 306,149 |
| 35.3 | % |
| 304,519 |
| 36.6 | % |
| 617,677 |
| 35.7 | % |
| 600,282 |
| 36.9 | % | ||||||||
| Other operating costs and expenses |
| 226,996 |
| 26.2 | % |
| 219,200 |
| 26.3 | % |
| 457,925 |
| 26.4 | % |
| 426,835 |
| 26.3 | % | ||||||||
| General and administrative expenses |
| 54,488 |
| 6.4 | % |
| 50,191 |
| 6.0 | % |
| 108,557 |
| 6.3 | % |
| 99,314 |
| 6.1 | % | ||||||||
| Depreciation and amortization expenses |
| 23,332 |
| 2.7 | % |
| 22,608 |
| 2.7 | % |
| 46,287 |
| 2.7 | % |
| 44,113 |
| 2.7 | % | ||||||||
| Impairment of assets and lease termination expenses |
| (653 | ) | (0.1 | )% |
| 106 |
| 0.0 | % |
| 1,589 |
| 0.1 | % |
| 313 |
| 0.0 | % | ||||||||
| Acquisition-related contingent consideration, compensation and amortization expenses |
| 1,287 |
| 0.1 | % |
| 948 |
| 0.1 | % |
| 2,476 |
| 0.1 | % |
| 1,839 |
| 0.1 | % | ||||||||
| Preopening costs |
| 6,006 |
| 0.7 | % |
| 2,947 |
| 0.4 | % |
| 9,058 |
| 0.5 | % |
| 4,711 |
| 0.3 | % | ||||||||
| Total costs and expenses |
| 818,699 |
| 94.5 | % |
| 804,701 |
| 96.6 | % |
| 1,650,887 |
| 95.3 | % |
| 1,570,090 |
| 96.5 | % | ||||||||
| Income from operations |
| 47,471 |
| 5.5 | % |
| 27,942 |
| 3.4 | % |
| 81,397 |
| 4.7 | % |
| 56,263 |
| 3.5 | % | ||||||||
| Interest and other expense, net |
| (2,162 | ) | (0.3 | )% |
| (1,130 | ) | (0.2 | )% |
| (4,042 | ) | (0.2 | )% |
| (2,591 | ) | (0.2 | )% | ||||||||
| Income before income taxes |
| 45,309 |
| 5.2 | % |
| 26,812 |
| 3.2 | % |
| 77,355 |
| 4.5 | % |
| 53,672 |
| 3.3 | % | ||||||||
| Income tax provision |
| 2,634 |
| 0.3 | % |
| 1,156 |
| 0.1 | % |
| 6,630 |
| 0.4 | % |
| 4,853 |
| 0.3 | % | ||||||||
| Net income |
| 42,675 |
| 4.9 | % |
| 25,656 |
| 3.1 | % |
| 70,725 |
| 4.1 | % |
| 48,819 |
| 3.0 | % | ||||||||
| Basic net income per share | $ | 0.88 |
| $ | 0.51 |
| $ | 1.46 |
| $ | 0.97 |
| ||||||||||||||||
| Basic weighted average shares outstanding |
| 48,492 |
|
| 50,387 |
|
| 48,593 |
|
| 50,360 |
| ||||||||||||||||
| Diluted net income per share | $ | 0.87 |
| $ | 0.50 |
| $ | 1.43 |
| $ | 0.96 |
| ||||||||||||||||
| Diluted weighted average shares outstanding |
| 49,085 |
|
| 50,929 |
|
| 49,296 |
|
| 50,966 |
| ||||||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | 26 Weeks Ended | 26 Weeks Ended | ||||||||||||||||
| Selected Segment Information | July 4, 2023 | June 28, 2022 | July 4, 2023 | June 28, 2022 | |||||||||||||||
| Revenues: | |||||||||||||||||||
| The Cheesecake Factory restaurants | $ | 652,481 |
| $ | 640,858 |
| $ | 1,308,481 |
| $ | 1,250,674 |
| |||||||
| North Italia |
| 65,934 |
|
| 56,238 |
|
| 129,237 |
|
| 108,995 |
| |||||||
| Other FRC |
| 65,728 |
|
| 60,020 |
|
| 134,368 |
|
| 118,852 |
| |||||||
| Other |
| 82,027 |
|
| 75,527 |
|
| 160,198 |
|
| 147,832 |
| |||||||
| Total | $ | 866,170 |
| $ | 832,643 |
| $ | 1,732,284 |
| $ | 1,626,353 |
| |||||||
| Income from operations: | |||||||||||||||||||
| The Cheesecake Factory restaurants | $ | 85,677 |
| $ | 64,327 |
| $ | 164,073 |
| $ | 127,771 |
| |||||||
| North Italia |
| 6,627 |
|
| 5,048 |
|
| 11,233 |
|
| 8,726 |
| |||||||
| Other FRC |
| 6,079 |
|
| 6,793 |
|
| 14,790 |
|
| 14,122 |
| |||||||
| Other |
| (50,912 | ) |
| (48,226 | ) |
| (108,699 | ) |
| (94,356 | ) | |||||||
| Total | $ | 47,471 |
| $ | 27,942 |
| $ | 81,397 |
| $ | 56,263 |
| |||||||
| Preopening costs: | |||||||||||||||||||
| The Cheesecake Factory restaurants | $ | 3,091 |
| $ | 1,372 |
| $ | 4,539 |
| $ | 2,406 |
| |||||||
| North Italia |
| 618 |
|
| 1,004 |
|
| 1,064 |
|
| 1,414 |
| |||||||
| Other FRC |
| 1,999 |
|
| 284 |
|
| 2,720 |
|
| 273 |
| |||||||
| Other |
| 298 |
|
| 287 |
|
| 735 |
|
| 618 |
| |||||||
| Total | $ | 6,006 |
| $ | 2,947 |
| $ | 9,058 |
| $ | 4,711 |
| |||||||
| Impairment of assets and lease termination expenses: | |||||||||||||||||||
| The Cheesecake Factory restaurants | $ | 38 |
| $ | 106 |
| $ | 131 |
|
| (59 | ) | |||||||
| North Italia |
| - |
|
| - |
|
| - |
|
| - |
| |||||||
| Other FRC |
| - |
|
| - |
|
| 55 |
|
| - |
| |||||||
| Other |
| (691 | ) |
| - |
|
| 1,403 |
|
| 372 |
| |||||||
| Total | $ | (653 | ) | $ | 106 |
| $ | 1,589 |
| $ | 313 |
| |||||||
| Depreciation and amortization expenses: | |||||||||||||||||||
| The Cheesecake Factory restaurants | $ | 16,235 |
| $ | 16,275 |
| $ | 32,244 |
| $ | 31,862 |
| |||||||
| North Italia |
| 1,668 |
|
| 1,222 |
|
| 3,135 |
|
| 2,520 |
| |||||||
| Other FRC |
| 1,809 |
|
| 1,470 |
|
| 3,736 |
|
| 3,051 |
| |||||||
| Other |
| 3,620 |
|
| 3,641 |
|
| 7,172 |
|
| 6,680 |
| |||||||
| Total | $ | 23,332 |
| $ | 22,608 |
| $ | 46,287 |
| $ | 44,113 |
| |||||||
| 13 Weeks Ended | 13 Weeks Ended | 26 Weeks Ended | 26 Weeks Ended | ||||||||||||
| The Cheesecake Factory restaurants operating information: | July 4, 2023 | June 28, 2022 | July 4, 2023 | June 28, 2022 | |||||||||||
| Comparable restaurant sales vs. prior year | 1.5 | % | 4.7 | % | 3.6 | % | 12.0 | % | |||||||
| Comparable restaurant sales vs. 2019 | 14.1 | % | 13.0 | % | 14.5 | % | 10.5 | % | |||||||
| Restaurants opened during period | 1 |
| - |
| 1 |
| - |
| |||||||
| Restaurants open at period-end | 211 |
| 208 |
| 211 |
| 208 |
| |||||||
| Restaurant operating weeks | 2,734 |
| 2,704 |
| 5,471 |
| 5,408 |
| |||||||
| North Italia operating information: | |||||||||||||||
| Comparable restaurant sales vs. prior year | 8 | % | 12 | % | 8 | % | 21 | % | |||||||
| Comparable restaurant sales vs. 2019 | 30 | % | 22 | % | 30 | % | 23 | % | |||||||
| Restaurants opened during period | - |
| 1 |
| - |
| 1 |
| |||||||
| Restaurants open at period-end | 33 |
| 30 |
| 33 |
| 30 |
| |||||||
| Restaurant operating weeks | 429 |
| 378 |
| 858 |
| 755 |
| |||||||
| Other Fox Restaurant Concepts (FRC) operating information:(1) | |||||||||||||||
| Restaurants opened during period | 2 |
| - |
| 3 |
| - |
| |||||||
| Restaurants open at period-end | 37 |
| 31 |
| 37 |
| 31 |
| |||||||
| Restaurant operating weeks | 462 |
| 403 |
| 913 |
| 806 |
| |||||||
| Other operating information:(2) | |||||||||||||||
| Restaurants opened during period | - |
| 1 |
| 1 |
| 1 |
| |||||||
| Restaurants open at period-end | 40 |
| 39 |
| 40 |
| 39 |
| |||||||
| Restaurant operating weeks | 520 |
| 505 |
| 1,035 |
| 1,007 |
| |||||||
| Number of company-owned restaurants: | |||||||||||||||
| The Cheesecake Factory | 211 |
| |||||||||||||
| North Italia | 33 |
| |||||||||||||
| Other FRC | 37 |
| |||||||||||||
| Other | 40 |
| |||||||||||||
| Total | 321 |
| |||||||||||||
| Number of international-licensed restaurants: | |||||||||||||||
| The Cheesecake Factory | 30 |
| |||||||||||||
| (1) | The Other FRC segment includes all FRC brands except Flower Child. | ||||||||||||
| (2) | The Other segment includes the Flower Child, Grand Lux Cafe and Social Monk Asian Kitchen concepts, as well as the Company's third-party bakery, international and consumer packaged goods businesses, unallocated corporate expenses and gift card costs. | ||||||||||||
| Selected Consolidated Balance Sheet Information | July 4, 2023 | January 3, 2023 | ||||||
| Cash and cash equivalents | $ | 91,557 | $ | 114,777 | ||||
| Long-term debt, net of issuance costs (1) |
| 469,040 |
| 468,032 | ||||
| (1) | Includes $339 million net balance of 0.375% convertible senior notes due 2026 (principal amount of $345 million less $6.0 million in unamortized issuance costs) and $130 million drawn on the Company's revolving credit facility. The unamortized issuance costs were recorded as a contra-liability and netted with long-term debt on the Condensed Consolidated Balance Sheet and are being amortized as interest expense. | ||||||||||||
Reconciliation of Non-GAAP Results to GAAP Results
In addition to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in this press release, the Company is providing non-GAAP measurements which present net income and net income per share excluding the impact of certain items. The non-GAAP measurements are intended to supplement the presentation of the Company’s financial results in accordance with GAAP. These non-GAAP measures are calculated by eliminating from net income and diluted net income per share the impact of items the Company does not consider indicative of its ongoing operations. The Company uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.
| The Cheesecake Factory Incorporated | ||||||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||||
| (unaudited; in thousands, except per share data) | ||||||||||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | 26 Weeks Ended | 26 Weeks Ended | |||||||||||||||||
| July 4, 2023 | June 28, 2022 | July 4, 2023 | June 28, 2022 | |||||||||||||||||
| Net income (GAAP) | $ | 42,675 |
| $ | 25,656 |
| $ | 70,725 |
| $ | 48,819 |
| ||||||||
| Impairment of assets and lease termination expenses(1) |
| (653 | ) |
| 106 |
|
| 1,589 |
|
| 313 |
| ||||||||
| Acquisition-related contingent consideration, compensation and amortization expenses(2) |
| 1,287 |
|
| 948 |
|
| 2,476 |
|
| 1,839 |
| ||||||||
| Tax effect of adjustments(3) |
| (165 | ) |
| (275 | ) |
| (1,057 | ) |
| (559 | ) | ||||||||
| Adjusted net income (non-GAAP) | $ | 43,144 |
| $ | 26,435 |
| $ | 73,733 |
| $ | 50,412 |
| ||||||||
| Diluted net income per share (GAAP) | $ | 0.87 |
| $ | 0.50 |
| $ | 1.43 |
| $ | 0.96 |
| ||||||||
| Impairment of assets and lease termination expenses |
| (0.01 | ) |
| 0.00 |
|
| 0.03 |
|
| 0.01 |
| ||||||||
| Acquisition-related contingent consideration, compensation and amortization expenses |
| 0.03 |
|
| 0.02 |
|
| 0.05 |
|
| 0.04 |
| ||||||||
| Tax effect of adjustments |
| (0.00 | ) |
| (0.01 | ) |
| (0.02 | ) |
| (0.01 | ) | ||||||||
| Adjusted net income per share (non-GAAP)(4) | $ | 0.88 |
| $ | 0.52 |
| $ | 1.50 |
| $ | 0.99 | |||||||||
| (1) | A detailed breakdown of impairment of assets and lease termination expenses recorded in the thirteen and twenty-six weeks ended July 4, 2023 and June 28, 2022 can be found in the Selected Segment Information table. | |||||||||||||
| (2) | Represents changes in the fair value of the deferred consideration and contingent consideration and compensation liabilities related to the North Italia and FRC acquisition, as well as amortization of acquired definite-lived licensing agreements. | |||||||||||||
| (3) | Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments assumes a 26% tax rate for the fiscal 2023 and 2022 periods. | |||||||||||||
| (4) | Adjusted net income per share may not add due to rounding. | |||||||||||||
