EPS of $1.08 increased by 197.3% from previous year
Gross margin of 13.4%
Net income of 52.44M
""We delivered another solid quarter with revenues finishing towards the higher end of our expected range and profitability surpassing expectations resulting in 24% year-over-year growth in adjusted earnings per share."" - David Overton
The Cheesecake Factory delivered a strong second quarter for fiscal 2024, with total revenues reaching $904 million, marking an 8.89% increase year-over-year (YOY). The company achieved a notable growth of 24% in adjusted earnings per share (EPS), demonstrating three consecutive quarters with over 20% growth. Management remains optimistic about the brand's resilience in the competitive casual dining sector, evidenced by a comparable sales growth of 1.4%, outperforming the casual dining industry average. Strong operational metrics, including a Cheesecake Factory restaurants' 4-wall margin of 17.7%, the highest in six years, reflect effective cost management and productivity improvements. Management has reiterated its commitment to expanding the restaurant footprint, forecasting a total of 22 new openings in 2024, indicative of sustained growth potential. However, external challenges such as inflation in labor and commodities remain a watchpoint for investors, underscoring the need for continued operational excellence.
Key Performance Indicators
Revenue
904.04M
QoQ: 0.00% | YoY:8.89%
Gross Profit
121.01M
13.39% margin
QoQ: 0.00% | YoY:-63.75%
Operating Income
66.63M
QoQ: 0.00% | YoY:250.11%
Net Income
52.44M
QoQ: 0.00% | YoY:192.25%
EPS
1.10
QoQ: 0.00% | YoY:197.30%
Revenue Trend
Margin Analysis
Key Insights
Total Revenue: $904 million (up 8.89% YOY)
Gross Profit: $121 million
Gross Profit Margin: 13.3%
Operating Income: $66.6 million
Net Income: $52.4 million
Financial Highlights
Revenue and Profitability Metrics:
- Total Revenue: $904 million (up 8.89% YOY)
- Gross Profit: $121 million
- Gross Profit Margin: 13.3%
- Operating Income: $66.6 million
- Net Income: $52.4 million
- EPS: $1.08 (diluted)
Trends:
- Comparable sales growth of 1.4% in a challenging environment indicates solid brand positioning and consumer demand.
- Conservative management of labor and cost of goods sold has resulted in reduced expenses relative to revenue.
- ECC of 4-wall margin (17.7%) showcases operational efficiency and effective cost control.
Cash Flow Metrics:
- Operating Cash Flow: $27.7 million
- Free Cash Flow: -$1.94 million (reflecting capital expenditures)
Investment in new units highlights management's strategic growth approach, balancing immediate cash flows with long-term revenue expansion.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
904.04M
8.89%
0.00%
Gross Profit
121.01M
-63.75%
0.00%
Operating Income
66.63M
250.11%
0.00%
Net Income
52.44M
192.25%
0.00%
EPS
1.10
197.30%
0.00%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management Commentary Highlights:
- David Overton, Chairman & CEO: "We delivered another solid quarter with revenues finishing towards the higher end of expected range ... our strategy of delivering exceptional service and memorable experiences continues to differentiate us in the industry."
- Matt Clark, CFO: "Total revenues of $904 million finished towards the higher end of the range we provided, adjusted net income margin of 5.9% well exceeded the high end of the guidance we provided."
- David Gordon, President: "Our history of operational excellence and strong staffing engagement is critical to our continued improvements in guest satisfaction and profitability.
Key Insights:
- Continued strong demand for the Cheesecake Factory brand, despite external market pressures.
- Focus on efficiency, retention, and guest satisfaction directly correlates with profitability improvements.
"We delivered another solid quarter with revenues finishing towards the higher end of our expected range and profitability surpassing expectations resulting in 24% year-over-year growth in adjusted earnings per share."
— David Overton
"Our operators continue executing at an exceptionally high level to drive NPS and profitability and our development pipeline remains intact."
— Matt Clark
Forward Guidance
Management has offered a cautious yet confident outlook for Q3 and full-year performance, targeting revenues between $855 to $870 million in Q3, paralleling the YOY growth rate observed in Q2. They expect labor inflation to be mid-single digits, with G&A projected at approximately $57 million. Adjusted net income margin is anticipated between 2.6% and 3%, demonstrating a proactive approach to managing costs amid inflation. The company plans to sustain a commitment to opening new restaurants, maintaining its growth trajectory in the challenging casual dining landscape. Investors should monitor upcoming developments in external economic conditions and restaurant performance metrics, particularly guest traffic and comparable sales.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CAKE Focus
13.39%
N/A
N/A
N/A
DIN
48.10%
24.10%
-10.00%
5.59%
BLMN
11.00%
4.12%
9.90%
14.73%
BJRI
10.30%
4.41%
4.44%
12.55%
RUTH
29.90%
9.71%
7.35%
14.15%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The Cheesecake Factory is positioned for potential growth with a stable financial foundation and successful management strategies. The recent strong performance metrics, with a year-over-year earnings growth and strategic focus on consumer experience, lend confidence for long-term investors. Key factors to watch include consumer sentiment transitions, inflation impacts on cost structures, and the successful integration of new restaurant openings into the existing operational ecosystem.
Key Investment Factors
Growth Potential
The Cheesecake Factory's ambition to complete 22 new restaurant openings in 2024 reflects strong growth potential in the current market. Management’s ability to balance expansion while maintaining operational efficiency is critical for future success.
Profitability Risk
Risks include ongoing economic pressures such as commodity price inflation and wage increases, which could challenge profitability. Additionally, potential disruptions from market dynamics or changes in consumer preferences may impact sales.
Financial Position
The company maintains a robust balance with total assets of $2.88 billion against total liabilities of $2.51 billion. Strong liquidity is supported by a cash position of $41 million and accessible credit facilities.