Ladies and gentlemen, thank you for standing by, and welcome to the Texas Roadhouse, Inc. First Quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any assistance, please press star zero for the operator. Thank you. It is now my pleasure to turn the call over to Ms. Tonya Robinson. Ms. Robinson, the floor is yours. Thank you, Sylvia, and good evening, everyone. By now you should have access to our earnings release for the first quarter ended March 30th, 2021, and it may also be found on our website at texasroadhouse.com in the Investors section. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements, including factors related to the COVID-19 pandemic. In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse. Following our remarks, we will open the call for questions. I'd like to turn the call over to Jerry. Thanks, Tonya, and thank you to everyone for joining us. Emotionally, the last six weeks have been extremely difficult for us. While the business environment and our financial performance have continued to strengthen, we have been mourning the passing of Kent Taylor, our founder, CEO, and friend. It was a sudden and unexpected loss, but in typical Kent fashion, he left us with a company built for success and a clear path forward. Kent will be deeply missed, but his legacy and his vision will remain firmly ingrained in our culture and how we will run the business going forward. 2021 has started off well for us, with significant sales acceleration and profitability improvement throughout the first quarter, driven by the easing of dining room capacity restrictions. Guests continue to return to our dining rooms and at the same time, to-go sales volumes remain steady for the quarter, and our sales momentum has continued into the first four weeks of the second quarter. Challenges continue to exist in this environment, the biggest being staffing. As the economy reopens and expands, as always, we remain committed to providing high levels of service at all of our concepts. Our operators are working every day to recruit, hire, train additional staff for their restaurants. It's never been more difficult to attract and retain employees. As a result, we are also seeing wage increases in our to remain competitive. To help offset some of these pressures, we implemented a 1.75% menu price increase, which went into effect yesterday. Consistent with our normal practice, we had calls with operators to get insight into what they were experiencing and used that feedback to get to what we believe is the right amount of pricing for the business. On the development front, our 2021 plan is progressing as expected. We opened three restaurants in the first quarter and have opened an additional five restaurants so far in our second quarter. We continue to expect to open 5-3 0 company restaurants this year, including as many as five Bubba's 33 restaurants and one Jaggers. We are very excited about the direction of both of our newest concepts. At Bubba's, many of our restaurants are generating sales and profitability above pre-COVID levels and appear poised for continued growth and improvement. Our newest Jaggers location continues to perform very well, and we'll be opening our fourth location in the back half of this year. We believe in the opportunity that Jaggers provides, and we continue to focus on how it will fit into our portfolio and what future growth would look like. We also continue to expand our retail business. Our margarita mixer became available in some locations in February, and our canned margarita seltzer just rolled out to a limited number of retail stores. These initiatives, along with our butcher shop business, provide a solid foundation for us to build upon. We will see how consumers respond to these offerings, but our current expectation is that it will take some time for these businesses to gain awareness and build momentum. I want to end my remarks with a message to the Texas Roadhouse family. To the over 600 managing partners who come to work every day ready to deliver on the promise of legendary food and legendary service. To the tens of thousands of Roadies in our kitchens, in our dining rooms, and in our support center, who understand what it means to take care of each other and our guests, thank you for everything that you are doing for Texas Roadhouse. My commitment to you is that we will remain Roadhouse strong for you, for our guests, and for Kent. Our restaurants will remain the friendliest place in town. We will continue to deliver service with heart. Our food will be recipe right, smoking hot, and picture perfect. That is what Kent expected. That is what we will continue to deliver. Now Tonya will provide a financial update. Jerry. For the first quarter of 2021, we experienced strong sales growth versus both 2020 and 2019. Comparable restaurant sales for the first quarter increased 18.5% over the prior year, comprised of 13% traffic growth and a 5.5% increase in average check. As dining rooms reopened and capacity restrictions eased, we saw trends improve with average weekly sales coming in just over $114,000 for the quarter. By month, comparable sales versus 2020 decreased 0.3%, decreased 3.5%, and increased 64.1% for our January, February, and March periods respectively. To-go sales volumes also contributed to our solid top-line performance during the quarter. Our restaurants averaged over $25,000 per week in to-go, which accounted for 22.3% of total sales. As Jerry mentioned, top-line momentum continued in the first four weeks of our second quarter, with average weekly sales over $124,000 and comparable sales up 126.7% versus 2020 and up 20.9% versus 2019. Our to-go sales trend continued with to-go over 23,000 per week, representing 18.7% of total sales at all restaurants. We continue to maintain elevated levels of to-go sales regardless of the restaurant's level of dining room capacity. Restaurant margins for the quarter as a percentage of total sales improved to 18.6%, largely due to the sales recovery. Traffic growth, along with a higher overall guest check driven by 1.4% menu pricing and 4.1% positive mix, outpaced both inflation and growth in labor hours. Food and beverage costs as a percentage of total sales improved by 82 basis points to 31.6% for the quarter, with commodity inflation of 1.8%. We updated our full year inflation expectation to approximately 4% due to uncertainty on supply and demand throughout the remainder of 2021, particularly on proteins and oils. Labor as a percentage of total sales decreased 476 basis points to 32.5%, despite labor dollars per store week increasing 2.8% compared to the prior year period. Wage and other inflation of 5.5% and a 2.3% increase in hours were partially offset by a 5% benefit from one-time items. Included in these one-time items is the impact of overlapping $10.7 million of labor costs from the first quarter of 2020 related to relief pay and additional benefits to our frontline employees, compared to $0.6 million of similar costs in the current quarter. Additionally, we are overlapping $2.3 million of costs in the prior year period unrelated to COVID for the adjustment of reserves on our group health insurance program. As we move forward, there remains a need to continue to bolster our staffing levels given the pace of sales recovery we have experienced over the last several months, which we expect to result in higher labor costs. Other operating costs were 58 basis points lower than the prior period, primarily driven by sales leverage and overlapping a $1.3 million charge from the first quarter of 2020 related to a quarterly actuarial reserve adjustment for general liability insurance. These benefits more than offset the higher costs associated with PPE, to-go supplies, and other COVID-related items. Moving below restaurant margin, G&A costs for the quarter increased $3.8 million versus the prior year period, but decreased by 46 basis points as a percentage of revenue to 4.6%. The increase in G&A dollars was primarily driven by an additional $5.2 million of cash and equity compensation, partially offset by a $2.4 million reduction in travel and meeting expense. With regard to cash flow, we ended the first quarter with $496 million of cash, which is up $132 million from the end of the fourth quarter. The increase was driven by $178 million of cash flow from operations, with most of the offset coming from $39 million of capital expenditures. We are pleased to announce that our board of directors has authorized the reinstatement of our quarterly dividend. The upcoming dividend, which will be paid in June, has been set at $0.40 per share, which compares to the $0.36 per share that was last paid in March of 2020 before the dividend was paused. While we are comfortable with our capital position and expect to continue to generate healthy cash flow from operations, our cash balance will be impacted by the reinstatement of our quarterly dividend. The upcoming repayment of $50 million borrowed last May under the accordion feature of our credit facility and the approximately $24 million of deferred FICA tax liability payment due at the end of the year. I will end today with a special thank you to everyone for the kind words, condolences, and memories that you have shared with us over the last month. They mean so much to me and all of us here at Texas Roadhouse. The loss that we have felt since Kent's passing is difficult to put into words, but I know how much he believed in all of us and in this company. We will continue to rock on for Kent. Operator, please open the line for questions. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypads. Again, to ask a question, please press star one on your telephone keypads. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Brian Bittner from Oppenheimer & Co. Thank you. Thanks for the question. First and foremost, just my condolences to the Texas Roadhouse team on the loss of Kent as well as his family. You've all been our thoughts and prayers, and us analysts are obviously going to miss his refreshing and sincere candor on these calls, that's for sure. As it relates to sales, you're doing 21% higher sales per unit right now than in 2019, and I know a big piece of this, Tonya, is the off-premise business. The math we just did says that you're still doing more sales per unit on-premise today than you were doing in 2019 with limited seating capacity. The thought before the pandemic on Texas Roadhouse, that you guys were always a really busy restaurant. You need to find creative ways to grow sales via bump outs or shoulder period growth. How you're putting up these numbers with less capacity is mind-boggling to us. Can you maybe walk us through the building blocks of how you're doing this? Is it much bigger check growth per customer? Are you just getting a huge unlock at the shoulder periods? Just anything you can do to provide us some help on these numbers. Sure, Brian, thank you for those comments. Yeah, when you look at April, and that 20.9%, a big piece of that traffic obviously is coming from that higher to-go volume that we're experiencing versus where we were in 2019. A lot of that is demand on the weekdays. We've seen that increase across all hours on those day parts, so that's a piece of what's helping it. Capacity restrictions obviously reducing throughout the quarter. We ended April with no stores on a to-go only schedule. Everyone had some type of dining room capacity. That certainly did help, and you definitely are seeing benefit on those shoulders, exactly what you're mentioning. We've got probably 200 or so restaurants that have opened earlier. They're opening at three o'clock versus four o'clock. You're seeing folks coming in earlier. Obviously, in those power hours, when you have those wait times, that makes it easier to get more people in the building because you have people coming in earlier, maybe to avoid crowds, things like that. I think that definitely has helped us from a capacity perspective. Your comment on the average check is exactly right. That average check is up. You do have some pricing. That pricing on a two-year stack runs probably around 3.5%-4%, but there's still a really good amount of positive mix that we see happening in the menu. We've been seeing that for a little while. You're seeing guests trading up to higher priced steaks and items, entrees on the menu, bigger steaks. You see that alcohol mix coming back into play as the dining rooms reopen. All those things really playing into what's driving a lot of that sales momentum that we saw in March and April. Your next question comes from-. Oh, I'm sorry, Sylvia. I just thought maybe I missed a piece of the question, so apologize. Your next question comes from the line of Jake Bartlett from Truist Securities. Great. Thanks for taking the question. I'd also like to share my condolences. It's really heartbreaking to hear. My thoughts are with you as well. I had a question about restaurant level margins. Tonya, you shared last quarter an expectation for 2021 of about 15%-16% restaurant level margins. With sales, I think higher than we expected or probably you expected, how much has that changed, maybe also just in light of the higher commodity inflation and labor pressures that you're seeing? Also, if you could comment on your long-term view on margins. I know it's tough to estimate the off-premise where it settles out, but are you more encouraged about your ability to maybe be above the kind of your long-term target? Yeah. Thanks, Jake. Given the results we saw in Q1, obviously, that's a great start to the year, right? That certainly helps from a margin outlook perspective. I'll remind you that Q1 tends to be a higher margin percentage than the rest of the year. That could be true for 2021. I think a couple of things I'd point out is that one thing is the sales recovery we saw in March. Probably the pace of staffing and labor did not keep up with that. We would expect moving forward, we'll have some additional labor costs as we are staffing, and Jerry mentioned the staffing initiatives and those things that we're doing would kind of cause me to think we'll have some additional labor costs. That's what we want to see with that investment happening. That's our expectation. When you think about it just over the course of the year, we've always said, the margin and outlook, which depends on the mix of sales, and if those to-go sales held and dining room sales were ramping up, that kind of helped those lower margin to-go sales be more neutral, as far as their impact on margin. That's beneficial to margin. That is where you could see us being on the higher end, kind of that 15%-17% range. Of course, a lot's going to depend on inflation, commodity inflation. We're seeing those costs increase. A lot will depend on the mix of those sales and consumer behavior and just all of those things. Still really too early to speak with a lot of certainty on it, other than we're pleased with how the quarter started and we're working on staffing and labor. Yeah. I would just add that, obviously we saw January and February as almost normal to some degree. Then in March, we got a little more capacity and some really outstanding results by our operators from a sales and profit standpoint and execution. Very proud of what they did for March and April, and it's exciting for the future. It is unknown on the labor side as we staff up and get caught up on the people side, then obviously as we hear a lot about pricing of new product and that side of it is definitely something we are paying close attention to. Great. Just as a follow-up to Brian's question earlier, my math as a whole for the first quarter is that in-store dining was down about 12% year-over-year from the first quarter of 2019. Could you share, you shared in the past, I'm not sure if you've done the math this quarter, but what was your average capacity in the stores, factoring in social distancing? I'm imagining that you're kind of out punching that capacity. Yeah. If you look at the dining room, it can be tough, especially in those months where there was a lot of changing happening pretty quickly as far as restrictions changing and things like that. When you get into months like March and April where all restaurants had some type of dining room capacity, it's tough to calculate, but I would imagine we were probably in the 75%-80% range from a capacity perspective. Some of the things I think that help us, and we're following all state and local guidelines, as far as capacity and things like that. Having the booths, having the partitions definitely help us from that standpoint. Opening a little earlier definitely helps. You've got operators starting to look a little more at that outdoor dining opportunity as we're getting a little more warm. All those things kind of play into that, for sure. If I had to guess, I would say it's probably in that 75%-80% range. Great. Thanks a lot. I appreciate it. Sure. Thank you. Your next question comes from Dennis Geiger from UBS. Thank you. Of course, condolences, thoughts and prayers with Kent, his family, and the Roadhouse family. I'm wondering if you could talk a bit more about the off-premise business, thoughts on the trends there and the strong sustainability that you've seen. You gave some commentary already, but just curious, anything more that's kind of based on what you've seen over these last few months shaped where you think retention and ultimately those off-premise dollars could end up going, and if there's anything that you could call out that you're seeing on the technology or the other initiatives that you've been pushing as you've leaned in on the channel. Be curious there. If there's anything on geography, as it relates to off-premise that's been interesting. I'd be curious as it relates to how you think about the go forward. Thank you. Thanks, Dennis. I can give you just some of the numbers perspective, Jerry will probably want to speak to more of some of the initiatives that we're working on and things like that related to go. From a numbers perspective, those numbers obviously are staying up there. We're seeing the percentage come down, but the per week sales number is sticking in that $24,000-$25,000 range, which is definitely good to see. Like we mentioned last quarter when we talked, if you look at the stores that have over 75% or more capacity in the dining room, those numbers aren't much different for them. They're holding on to it. They're finding ways to do it. One other perspective I'll give you is, we've had a big focus on digital, and we're seeing the digital compared to call-in increase a bit. It ran about 50%, I think last quarter it was up closer to 55% this quarter. You are seeing a bit more of buy-in on that digital, which could be helping from that perspective too. I would just say from an operation standpoint, we're continuing to do some curbside, but our convenient pickup windows that we've really put in across the concept have really been a hit with our guests. We're excited about that. The ability to text and communicate with our guests for them to stay in their car and then come get their food has been a big win. Our app upgrade has continued to show excitement and user-friendly facility kind of deal. We tested a couple of drive-up windows, not drive-through, but a drive-up window where people can text, stay in their car, and then come pick up their food from that. It's having also some success. We're really excited about holding those numbers, and our operators are really figuring out the to-go side and making it a great experience when those folks land at home, and they open up that food around their dining room table with their families. Thank you. Your next question comes from the line of Peter Saleh from BTIG. Great. Thanks, and my condolences as well to the Texas Roadhouse team and Kent's family. Tonya or Jerry, it just looks like from the numbers that you're putting up, which are really impressive in the quarter and in the month of April, that you're gaining some significant share. I'm trying to understand if you guys think that this is more temporary or permanent. I guess, as you look across the country in many of the markets where you're picking up share, are you seeing any evidence that some of your competitors are still closed or just slower to ramp back up because of the labor environment? Do you feel like the overall environment is pretty healthy right now, and these gains are more permanent in nature? We sure hope so. We're going to execute, and we're going to try to earn that business from our guests. I will tell you that, yeah, I would assume if you read things, there's a lot of restaurants that haven't reopened. Some are really fighting that staffing battle. I think we are winning that. People are making some good money working on our shifts, and it's busy, and they're excited about it. Maybe that's a part of the reason why we're maybe winning the staffing battle a little more than others. We're going to continue to deliver on our promise of legendary food and legendary service and create a great environment for our employees to work in. We're going to continue to get staffed, assuming that those sales are going to stay there, and we're going to earn them. Great. Very helpful. Then just coming back to margins. Tonya, I know you talked about 4% commodity inflation. I think that's up from maybe previous outlook of about 3%, but there was only about 1.8% in the first quarter. Can you walk us through the cadence of inflation for the balance of the year, how you guys see it at this point? Thanks. Yeah, sure thing, Peter. Obviously, we raised that guidance from 3%-4%, with that 1.8% result in Q1 implies that we're going to see higher than that 4%, most likely throughout the rest of the year. Right now, it feels like our assumption is it's going to be pretty evenly spaced across the year. There's definitely pressures now. I think Q2, we expect to see those higher levels of inflation. There could be some opportunity for that to moderate in the back half of the year, just depending on different things happening. The suppliers continue to struggle and be challenged by labor. You continue to see weather impacts from Q1 impacting some of the supply. Just overall demand being as high as it is across the industry is creating some pressure. Right now, our expectation on that 4% on a full year would be pretty evenly spread over the next three quarters. Thank you. Your next question comes from John Glass from Morgan Stanley. It's hard to imagine what you've all gone through, and I'm so sorry for that. We all miss Kent on this end as well. Maybe just coming back to this capacity question that was raised earlier, maybe it would be helpful, just what are the volumes your top quartile or quintile restaurants are doing now so you get a sense of what is possible if these kind of trends sustain? How big a role does outdoor seating play? I know it's early in the spring, but has that been a way that you've been able to serve more of this volume that you haven't historically experienced? Sure, John, this is how, trying to start things off. I'll tell you, we have stores today in March and April that were able to serve 8,000 - 10,000 guests a week. They're generating significant sales. The level of sales for them depends on where they're located, what kind of menu pricing they have, different things like that. We focus a little bit more on that guest count because that really affects how they execute within the building. You see those stores doing well. Those stores, they're definitely going to be in states that are 75% or more. They're probably closer to 100. Their to-go sales are staying high. They're finding ways to do that. They're getting benefit definitely on average check, too, with pricing and just that positive mix we talked about earlier. We see stores able to do that in a normal prototype. That gives us confidence that we think as dining room restrictions are lifted, we can continue to see that happen across the company. I think just the model that we have of sharing best practices, everybody working together helps that too, because they're definitely talking to each other, and folks are seeing the results at other places. It drives their motivation to do the same thing. We do feel confident about that opportunity. A lot will depend on that to-go sticking, and a lot will depend on continued consumer behavior and how that consumer's feeling throughout the course of the year and how much discretionary funds they have to spend. We don't take it for granted, that's for sure. We feel good about the opportunity. Yeah, John, I would just say that we're very pleased with how we're holding the to-go sales on our high volume stores that are 75% and 100% capacity. The exciting part for us is all the stores that have gone from 0 to 25 to 50 and the upside for them. What we learned how to ramp up our staffing from the group that went six months ago with the more open capacity. With them sharing that information, we're now able to get staffed up a little quicker on some of these ones that go from 0 to 50 or from 25 to 75, and we have a strategy and a plan to be able to be properly staffed to execute when we jump capacities like that. The future is exciting from that aspect, and we have a good plan of being able to share with each other how to get there quickly to be able to execute for the volume. Thanks for that. Maybe just a quick follow-up. On labor and scarcity, first, is there an actual issue where you may be not being able to get the staffing that you need? Is it that bad, or is it more just a wage rate issue? How do you think about wage rates in the second quarter, that 5% or 5.5% you cited? Is that kind of the current run rate, or has that been accelerating sequentially, so it could, in fact, turn out to be worse as we get through the second quarter? The wage rate's tough to say. If you're looking at it, I think it continues to hold a bit. We will be kind of lapping the bump we took when we were to-go only, and we were doing minimum wage for those tipped employees. We took a bit of a hit there in 2020. We'll be lapping that. That kind of started in April. You may get a little benefit there if you're just looking year-over-year, but I would expect that those wage pressures continue. I think when you saw the stores on the scarcity thing, I think initially as the sales started ramping up fast, you did have where it was tough to find people, because you were trying to do it really quickly. I think they've gotten much better at that. We've provided so many resources and really worked with them to make sure that we're taking care of that, and getting them there. It's both a staffing, finding folks, and a wage rate issue, depending on what part of the country you're in. Yeah. I would just say, John, as Doug Thompson, our COO, just finished 65 calls with our multi-unit partners, and there's definitely a large group that are fully staffed. There's a big group that are close to it, and then there is a group that needs a lot of help and support to get there. I will tell you that everybody in this company, we call it ninja staffing, but we are all in to support and help our operators get the people that they need, that we can have the hospitality that we like to present and deliver. Thanks for that. Thanks, John. Your next question comes from David Palmer from Evercore ISI. Thanks. My condolences on Kent as well, and also congratulations on this business update in addition to that. Some restaurants lately have identified productivity during the stress of this pandemic, and they're coming out of this thinking that they might reach new highs in margins as sales come back, that they might have found some new tricks of the trade under the duress of this sales dip. Were there any learnings through the crisis that have you thinking about newer highs for profitability than you had thought previously, maybe upside to that old 17%-18% range? I have a follow-up. Yeah, sure, David. I think probably the bigger upside is just what that mix is of dining room sales and to-go sales, and where that mix stays on that check, because that obviously is very beneficial to the bottom line. Those are two things I'd probably say, a lot depends on that. I think there's no doubt we've learned a lot the last year and a half on running these restaurants during and at these levels of to-go and all of that. The one thing that we continue to take away, though, is not to make changes that put legendary food, legendary service at risk. It's really easy to want to do that, to cut something to get that profitability. We look at it as that long-term investment. We've talked about it a lot over the years. We're going to stay true to that. We've done that in the past when we've been in a crisis situation like 2007 with the economy, and we just know that works. From our perspective, it's stay true to those things. A lot of that is because of the compensation program we have in place. The way we pay our operators based on the bottom line, as you all well know, motivates them already to run efficiently, to make the right decisions, to control costs, and do what they need to do to drive top-line sales. There's no change there for sure, that I think keeps us in a good spot. Yeah, David, I would just add that we did learn a lot. The one thing we learned was that the entrepreneurial spirit in this company is strong, and we learned that a lot from Kent. He gave us the freedom to be owners and operators and partners. He listened. He asked. We collaborate. We talk to each other. We help each other to find solutions. It is a strength in our company that we believe in that if somebody's having a win and they share. It's exciting to know that we are very thrilled, number one, about our results in March and obviously April as we go through, and even January, February. The quarter itself, it was impressive what our operators will continue to surprise. I say surprise, I don't know that I'm surprised. It is just I'm so happy for what they do. It's easy for me to sit here and brag about what champions these people are that are out there in these restaurants delivering on our promise of food and service. Just a quick follow-up on that is there any way for you to give us a sense of how much of a margin help it has been having the type of check gains that you're having, the fact that people are perhaps in that mood of having the extra beverage or whatever that they might not have been having before? Then how much of a margin dilution it is that 25,000 per week is happening from takeout? Any margin descriptions of those two things? Yeah, sure, David. When you look at the to-go, it's really hard on a margin, to talk about it from a margin perspective, because you got to determine what you're allocating into that to-go bucket versus into the dining room. You could say, hey, there's the opportunity perhaps for some labor savings on the to-go side. You have higher cost of supply. There's a lot of different puts and takes. We know the bigger issue really on the to-go margin is the $4 difference on PPA. That's really the bigger driver. We've been working to get that to close that gap, think of different creative ways to do that. We've seen that gap close a little bit. That's been cool. I think we'll just continue to focus on anything we can do from that sales perspective to hold on to those to-go sales from a margin perspective. That's really going to be probably the bigger push there on that. I'm sorry, I just did want to give you some thoughts on the 8.6% comp number that we had for 2021 versus 2019. There was about 2% mix in that, positive mix. As you all know, that number runs usually for us a little more neutral, a little flat, negative. That's a pretty big number, 2.1% on sales volumes that we have. Pricing was about 4.9%, so a 7% increase on average check in that 8.6% number, just to give you some insight into what that mix impact looks like. Thank you. Your next question comes from Jeffrey Bernstein from Barclays. Great. Thank you very much, and my sincere condolences to the Texas Roadhouse family as well. I think Kent's spontaneous commentary on these calls will forever be missed. Jerry, you got to come up with some catchy phrases to keep us engaged. Two questions. One, just on the inflation side, besides the efficiencies that we've talked about, that you've perhaps learned through the pandemic, just wondering whether you think the 1.75% price increase, I think you said you took yesterday, is enough to last you through year-end. I think, Tonya, you just mentioned maybe you're now running close to 5%, it could actually be enough. I'm just wondering with COGS inflation being raised and labor inflation on the way up, how you think about the next window of opportunity to raise prices further or whether you go through a period of time like you have a number of years ago where you're not focused on the near-term margin, you're focused on regaining the traffic? I have one follow-up. Su re, Jeff. That 5% pricing I mentioned was a two-year number. It was 2019 to 2021, that was two years' worth of pricing. It's only 1.4% of pricing that's in Q1, just 2021 versus 2020. That's made up of, there was 1% that we took in November of 2020. We had about 35 basis points on liquor and salsa that we took in August. That's how you build that 1.4%. Right now, we feel like that 1.75% is where we need to be. As Jerry mentioned, that was based on feedback from operators and how they were feeling and the wage pressures. In states that have higher wage pressure, we took more pricing in those stores where they were seeing those mandated numbers going up. Stores that didn't have that pressure, maybe we took a little less. We feel good about that number right now. We'll have the conversation in Q3 again, as we typically do, and we'll talk to the operators, take the temperature of all the different things you look at when you think about pricing, and we'll see. It would probably be something we'd implement November, December. That's typically the way we look at it. Got you. Through November of this year, you're probably running now just north of 3% pricing. That's right. Yeah. Got you. You have some roll-off, yeah, in Q2. It looks like about 2.6 because we started it basically the first day of our P5, our May period. Then you ramp up to that almost three in Q3. Got you. Then just a follow-up. Jerry, I'm just wondering your thoughts on leadership more broadly, whether you think there's room or opportunity to make hires in the C-suite or at the senior level. We know that Kent did more than most could obviously expect of you or anyone else, and after all, he brought you in to help him. I'm wondering whether, I would think you would need somebody to do the same to fill the shoes you were going to be taking, especially because Kent being the founder and the visionary. Just trying to think about how you think about leadership going forward, whether there's any change to be perhaps expected. Thanks. Come on, man. What kind of question is that? I'm just kidding with you. Hey, I heard your first comment that I need to be funnier or more entertaining. I don't know that I can do any of that as good as Kent did, but we will have some fun at some point. I will tell you that, my philosophy is, in my conversations with Kent when he promoted me to President, and about building a strong leadership team, and we have a very clear vision as to get what we call bigger, faster and stronger. At every level, whether it be in the restaurant management, whether it be the multi-unit supervision here at the support center, we will definitely look at the workload that is needed, the visions that are needed and add the right people when needed to add value to our team. We will continue to get stronger. It's a big job, no doubt about it. It's big shoes to fill. I think he would tell me to be myself and to continue to do the things that I've done that have been pretty good, which is really building teams and structuring and communication. I love Texas Roadhouse. I've been a part of it for 24 years. Now that you've gotten me talking a little bit, it's an exciting future, especially after what we've seen happen in March. We are so grateful to all of our guests who, I believe, came in to pay their respects to Kent and everything that he's done and meant to Texas Roadhouse. Maybe there was some of that in our sales spike in March. I think he was so well-known and respected and loved by all of us, and we know the recipe to succeed. He taught us that. He has paved the way for us, and we will continue to follow that recipe, and we will execute to the best of our ability. Great. Thank you. You're welcome. Thank you. Thanks, Jeff. Your next question comes from David Tarantino from Baird. Hi. Thank you. It's David Tarantino. My condolences to the Texas Roadhouse team and family as well. Thanks, David. I wanted to ask Tonya if there's an easy way to frame up the labor line as you look at all the moving parts. I mean, the last couple of years have been so volatile. I was wondering if you could maybe talk about, in terms of dollars per week or how you would encourage us to think about modeling that line, given all the pieces. Yeah, sure, David. It's a tough one, no doubt about it, especially with the volatility in 2020. One way you can look at it is really to base it off 2019, kind of starting with that labor dollars per store week, and growing that percentage of sales using inflation over a two-year period. I think we ran around 5%, 5.5%, something like that, 5.5% in 2019. That could be pretty similar in 2021 or, yeah, for this year. Taking that two years back there and combining that, saying, "Hey, could inflation on a two-year basis be closer to 10%?" Maybe a little over that. I think when you look at the hours component of it's possible that we could be at a similar hours to 2019. Because I think you need to see dining room restrictions lifted over the course of the year. It's going to take time to get back, as we get back to those levels, and sales continue to grow. That's the way we look at it, is saying, "Hey, it could be possible that hours are neutral to 2019." We see a two year stack on inflation be around that 10% or so. That could be one way to look at it. It is a difficult number to forecast this year, just given the volatility last year and some of the volatility we continue to see as we're figuring out what those hours need to look like. Got it. I guess, with traffic likely being up versus 2019, why would you have the hours be the same? Is there some efficiencies that you have derived coming out of the pandemic? I guess why would the hours not be higher? Well, there's a possibility they could be. I think a lot depends on the continued pace of sales and how they grow. The staffing that we've talked about is getting back to fully staffed like we were in 2019. I think that's a piece of it. There could be some efficiencies on the to-go side. If that continues to be a little bit higher piece of the sales number, you could see a little of efficiency there because you don't have quite as much labor perhaps on that to-go side. That might be where you can see some opportunity to pick it up. Great. Thank you very much. You're welcome. Your next question comes from Brett Levy from MKM Partners. Great. Thanks for taking the time for the call. Again, like everyone else, condolences and wishes to everyone. Really tough times for you all, but good job. Jerry, I guess I'll start with a question for you, and it might be a little bit early to talk about the landscape, but given what you're hearing from the field, what are you seeing and hearing about closures, and does that give you any change in your thoughts about what the long-term unit potential looks like? Given what we've seen from guest behavior, how you're thinking about box design and utilization. I have a separate question. I think we're going to stay with our plan and execute our 25-30, depending on the Texas Roadhouse is our mothership. We are very excited about Bubba's 33 growth through the pandemic and where we're at from a partnership and leadership plan. Jaggers is very exciting to us, and we're having some real success with our new unit over there, and we've got a couple of plans and moving forward on that. I believe that Doug is going to continue to focus heavily on Texas Roadhouse, and he's going to partner up and help me. I will take the lead on Jaggers, just like Kent had that, and we will get that thing up and running operationally and grow. We're going to probably stay. The box is pretty well-designed. We have a couple of processes or prototypes, I guess, you would say, that we're looking at to help with our to-go execution. We're trying a few things. We're very happy with the pickup windows, and we're excited to see what this drive-up window does for us. If it really makes it convenient for the guest and we could really get into that game, then maybe we go back and look at some stores that we might be able to retro in and see if that works. We feel like our building gives us some ability to adapt and change, if needed, to be able to execute better. We feel really good about the design of our front of the house and back of house interior. We are able to execute it very well from the kitchen layout, getting the food out of the kitchen and getting it delivered to our guests in a great presentation. Yeah, Brett, I'll mention to you, too, there's more to development than just finding the sites. It's finding the people, those management teams are so important. Sometimes that's harder to ramp up quickly. That's something we're always going to be really careful of. You don't want to just open those restaurants because you got a piece of land to do one on. You want to make sure you've got the team and people are ready to go. That's something we're always thinking about, too, when it comes to development. Fair enough. This can be for either. Just taking David's earlier question in another direction, just all of the things that you've learned. Instead of just focused on the margin, structurally and strategically, there are a lot of things that you do now that you didn't ever really envision doing, whether that's to-go or retail. What else are you looking at that you've learned that maybe is worth considering, whether that's your stations per server, just the level of expansion of tech launch now that you've gone to earlier windows? I'll stop there. I would say, the thing that we probably would find most intriguing is how to pay at the table. If we can get that deal done, then I think that really does enhance the speed of the experience. Maybe the app has been huge for us. We've really upgraded that tremendously, and it seems to be very user-friendly and being utilized in a much more efficient way. The ability to text with the guest and communicate with them like that has really been a big win for us in a lot of ways. From that speed side, I don't know that we'll ever get away from our philosophy of legendary service being anything more than three tables. I don't know that we will have a kiosk or the kiosk or whatever to replace a smiling face engaged in your level of service. We need to work on our pay at the table plan and get more people to utilize that and see what technology will help us in that particular part of the experience. Very helpful. Thank you. Thank you. Thanks, Brett. Your next question comes from the line of Jared Garber from Goldman Sachs. Question. Of course, my condolences as well. I had a follow-up on the last question as it relates to the technology infrastructure that you guys are building. We've seen the app downloads really accelerate along with those updates that you made at the back half or the back part of last year and into this year. I wanted to get a sense of how you're using maybe the data through that app and what you're learning about the customer and who that customer is that's using the app, and whether they'd be different from the customer that you traditionally see in a Texas Roadhouse, or if it's current users adopting that technology. Yep. Hey, Jared. Thanks for the question. We're really just dipping our toe in the water with the data. We haven't really gotten into really doing that. It's very early yet. That's something that we definitely see some opportunity with that data and utilize it. You just always have issues with privacy and things like that. It's just really early yet on doing that. Hopefully, we'll have more for you all on that next call. Your next question comes from the line of Chris O'Cull from Stifel. Thank you for taking my question, and welcome Jerry to the new role. I look forward to following your progress. Thank you. Tonya, you mentioned lapping quite a bit of COVID-specific expenses in the quarter. I was hoping you could maybe give us a sense of how that progresses through the rest of the year as you lap pandemic pay and some of the other items. Sure, Chris. Hold on. I'm looking to see if I have that handy. The numbers we called out in Q1 were some of the biggest numbers that I think that we had. I might have to get back with you on what those numbers were, how they played out for the rest of 2020. Looks like we had about $4.7 million on employee benefits for Q2 of 2020. In Q3, we had about a $4.5 million tax credit related to the stimulus payment that we did in Q1. That's where we went back and picked up that tax benefit. Maybe another $5 million of cost, that offset that $4.5 million. In Q4, we had about another $500,000 of net cost. That was the cost we picked up net of tax credits. Hopefully that gives you an idea. I know we spelled those out on the release, so if you need more detail, that might be the place to check those numbers out. That should be the bigger pieces of it. Okay. No, that's helpful. I apologize if I missed it, but can you provide a range for G&A for the year? I'm assuming incentive comp could be meaningfully higher, given the current trend. Hoping maybe you could help us ballpark that. Sure. Yeah. I think probably with, just as you mentioned, with that higher equity compensation cost and the results and things like that and how performance comp turns out, that'll be a big piece of how G&A grows. I think the expectation right now that it would be higher, definitely higher than we were in 2020, probably getting back even higher than 2019 levels. We'll have conference get back into play in August, September. Travel, we would expect, would start ramping up. We're still making some estimates and assumptions on that right now. We haven't really started turning that faucet back on yet. Assuming we will probably later on this year, beginning to maybe have some more in-person meetings, things like that, would be built into that assumption that maybe we would be a little bit higher than where we were in 2019. That's helpful. Thank you. Your next question comes from the line of Lauren Silberman from Credit Suisse. Thanks, and I also share my deepest condolences. Really impressive sales levels. On-premise fully returned to-go at 20,000 pretty consistently. There are puts and takes going forward with stimulus rolling off, easing capacity restrictions, pent-up demand, and some of those other factors you mentioned on extending hours and shoulder periods. Just as you think through the rest of 2021, is your base case expectation that you can maintain these levels of on-premise and to-go sales volumes that you've seen over the past couple of months from here? Hey, Lauren, it's Tonya. That would be our expectation. We would hope that we begin to see dining room restrictions ease in more places and that those dining room sales continue to grow. The hope would be that we continue to see opportunity on those shoulder periods and we see to-go to continue to be strong. That's what we're working towards. That would be our goal is to see that happen. I do agree, though. I think you're right. A lot of those things you mentioned, stimulus payments and the health of the consumer and all those things, I think, will definitely come into play probably later on in 2021. Yeah, I would just say, again, as we continue to see people being a little leery of coming inside the dining room and all of that, the vaccinations, we believe, are helping. I think there's still a large group of consumers that really don't want to come in the building. I believe that we believe, we'll know more each quarter, that there's still going to be a large demand for our to-go business as long as we execute it properly and we feel good about that. We definitely have got a good blend of the ability to execute it. We feel comfortable that We'll do our part. Hopefully, the consumer will decide whether they want to go in their vehicle or they want to come on inside. Yeah, Lauren, one other thing I'd mention, too, it'll be interesting to see if we get back to normal seasonality or not. A lot of that depends on vacations and kids going back to school and just some of how that plays out over the year. We'll see how that turns out for 2021. Great. That's really helpful. What's your sense of overlap between the on-premise and to-go customer and differences in use case? Do you think the primary driver is some of that still hesitancy that's going on? More broadly speaking, there's just that demand for to-go. I think there's still, in some areas, definitely folks who are a little more hesitant to come inside and eat. I think that continues across the country. You're seeing that, and that certainly helps us from a to-go perspective, continues to help that. I think you also maybe have folks who added a senior rotation one more time than maybe what they normally did because maybe they're okay eating in and they're okay getting to go. We don't have a lot of hard data on that or anything to point to. That just would be my speculation. Great. Thanks so much. Your next question comes from John Ivankoe from JPMorgan. Hi. Thank you. Jerry, your comments that this was I think the most difficult staffing environment that you've seen in terms of attracting and retaining employees is just interesting in itself. I just wanted to get a little bit more insight in terms of what you see you're basically facing the industry. In other words, the people that you have in the restaurant or maybe that you're losing or are unable to retain, are they taking jobs other than restaurants? Are they taking jobs at other restaurants? Are there still some lingering, maybe COVID concerns that, I suppose certain employees might have? In other words, what are the challenges of getting the people that you could have gotten two years ago into a Texas Roadhouse that makes excuse me, 2021 different than 2019? Again, these are kind of more industry questions maybe than Texas Roadhouse, but certainly would love to hear your perspective. Well, I can tell you in talking to our operators, we're getting a lot of applicants. Not everybody is really motivated to get a job, we're seeing a lot of no-shows. Our turnover is lower than it's historically been, we are actually keeping our people really well, which I'm real proud of our operators for that. Their concern is that they're being very aggressive recruiting and trying to let people know. We're setting up these interviews, people just are not showing up, which is really unusual, maybe that's because of the payments that they have. The money's coming to them a little easy, just my opinion. That's where our concern is. Once we get them and they get in, they're making good money at our restaurants. We're keeping them very busy, there's no doubt about that, and they like that side of it. We just have a lot of no-shows from the applicant standpoint. We're having to be a little more aggressive on the hiring and training, and then obviously we treat people and take great care of them. Yeah. I'd say certainly you're known for that, which is why obviously I'm asking your opinion. Thank you for sharing that. Are the challenges, are they in the waitstaff? Are they busers, dishwashers, or line cooks? Are you seeing any particular functions that are seeing pressure? I would say it's a little bit of everything. When we look at our numbers compared to 2021, we're almost back to 2019, I would say. We're almost back there. We're attacking it. I will just say that, and I have said that whoever's going to win this year is going to win the battle of the people, compared to what the challenges that we had to learn how to pivot in 2020 and adjust our business. This year, I think it is going to be the restaurant chains that can get people and supply the guests with a great experience as they start to come back more and more. We're excited about our sales and our guests are pretty loyal, and they are absolutely excited to get back in the building. We've just got to continue to be and be able to provide a great experience for them. Thank you. Thanks for that color. Thank you. Thanks, John. Your next question comes from Brian Vaccaro from Raymond James. To the team as well, you all certainly remain in our thoughts and prayers. Most of mine have been asked, but two quick ones, if I could. Tonya, I know it's a very dynamic environment, but on store margins and the cadence you saw through Q1, I believe you were in the 15%-16% range last time we spoke back in January, February, which seems to imply seeing store margins north of 20% as your sales volumes have moved higher moving through March. I just wanted to confirm that's right. Secondly, wanted to ask about the other OpEx line. I noticed that that ticked up sequentially this quarter, and we're also above 2019 levels. Could you just walk through some of the puts and takes in that line? Were there any one-timers to be aware of? Yep. Sure, Brian. You're absolutely right when you think about the cadence of the margin throughout the quarter. That sales recovery in March, and a little bit of the lagging from a labor perspective definitely was a big benefit on the margin side. Yeah, margin definitely ticked up in March. Were you asking about the other operating cost line? Yes. I think the only thing I would call out is just the number we called out regarding in the script on that general liability insurance deal. We did have that we were lapping from last year. Other than that, utilities, we tend to see being up a little bit. You just have the normal expenses related to PPE, things like that. Other than that, there's really nothing. When we talk about PPE, one of the bigger ones is gloves. Those we've really seen some spikes in cost on due to the materials that are required to make those and where they come from, things like that. It's really caused that glove cost to be pretty high. Just to give you some examples of some of those supplies, things like that we can see increase. Okay. Thank you. Yep. Thanks. Your next question comes from Jon Tower from Wells Fargo. Great. Thank you. I'd also like to pass along my condolences to the whole Texas Roadhouse family. Just a quick clarification and then a question, as most of my questions have been answered. I think, Jerry, you had mentioned earlier some stores operating 100% capacity. I just want to make sure I'm fully understanding what that means. Are you talking about 100% capacity based on state guidelines or 100% capacity within the CDC guidelines of the 6 ft? Yeah. Those are state and local guidelines that we utilize with all of our partitions and obviously trying to understand, everybody's a little bit different out there. These last 60, 90 days have been quite a few adjustments, but we are absolutely trying to follow the state and local guidelines. Yeah. Jon, when it's 100%, as we've said before, that's not quite 100%. We're not seating the bar, we're not seating the tables to be able to abide by those state and local guidelines. Got it. Perfect. That's what I was wondering. This is a longer-term question in nature, but I am curious, we're hearing from a lot of concepts that haven't really opened new stores. They seem to have plans in the next several years to be opening new stores again from a chain standpoint. I'm kind of curious to hear from your perspective how deep your current new store pipeline is today. If you're starting to see any sort of hints, particularly in the out years, that the competition for new sites is starting to heat up at all, and rents around that as well, if any indications that it's actually stepping up at all yet? Nothing that I've seen. I think we're lucky. Texas Roadhouse is a preferred renter of land, and they like having us on their location. That certainly probably makes it a little easier for us. I think you're definitely, given the way the industry's moving, you're probably going to see people coming back, restaurants reopening, coming back into the industry. We'll continue to see how that plays out. Maybe it's possible that that's not as impactful for us just based on our model of working more. We're not really necessarily in the malls. We're not in urban locations. Tend to be more in the residential suburb areas. That could be beneficial. We'll see. Jon, we're not really seeing anything right now from a rent perspective or anything like that that would indicate things increasing. Yeah, I would just say that we feel very good about our pipeline, we've been really steadily focused on it to continue to look in the positive side. We feel that our growth is very solid as we have performed the last three to five years, or probably even 20 years, is that we have that same model in place. We have our same structure, our pipeline, we're continuing to move forward where obviously we see these numbers too, we're excited about the loyalty of our fan base out there. We're going to continue to provide places for them to pick up legendary food and have a great experience. We are very focused on that, we feel good over the next few years that we will use the same model we have. We think we can do that 25-30 every year, at least for the next three to five, if not in the next 10, hopefully. That would be great. I did want to say before we end, just thank everyone for your condolences and keep us in your thoughts. We are hurting and we're healing, but we're strong to the core and we feel like we have a job to do and we're very excited about finish this dance for Kent. He taught us pretty well and we have a heck of a family here at the Roadhouse and we're very excited to continue to show respect and love to a man that gave us so much and gave so much to the world and to the industry. I show no further questions at this time. I will now turn back to the management team for any closing comments. Yeah. Thank you, Sylvia. Thanks everyone for joining the call. We hope you all are doing well. If you have any other questions, please feel free to reach out. Have a great night. Thank you all. Ladies and gentlemen, this does conclude today's conference. Thank you again for your participation. You may now all disconnect.